Trading Strategies · CFDs Trading Guide

Range trading assumes a price relationship will continue to contain movement. The largest risk often arrives when that assumption stops being true.

State why the range might persist

Repeated reversals inside a band describe past behaviour. They do not explain why the next test will hold. Identify the market context, such as a temporary balance of expectations, and the event that could change it. Use a fixed observation rule so the range is not continually redrawn to justify an open loss.

Connect entry and invalidation

An illustrative long setup might enter at 102 within a 100 to 110 range, target 108 and exit if the thesis fails at 98. The planned price gain is six units and risk is four. A tighter stop can improve the displayed ratio while increasing routine stop outs. Test the whole distribution rather than optimising the appearance of one trade.

Account for friction

At $5 per price unit, the example offers $30 of price gain against $20 of price risk for one contract. If total execution and other costs are $6, the simplified net outcomes become a $24 gain and $26 loss. A strategy can win frequently and still struggle when small targets leave little room for costs.

Do not average away invalidation

Adding contracts as price moves beyond the range changes both exposure and the original claim. A genuine trend can continue much farther than the old band. Define a maximum holding period and a response to event risk. A decision to stay out after a structural break is part of the strategy, not a missed opportunity that must be recovered.

Try it yourself

For a $24 net win and $26 net loss, is a 50% win rate sufficient to break even under these fixed outcomes?

Show the worked answer

No. The average result at 50% is $12 minus $13, or a $1 loss per trade. The break even rate is 26 / 50 = 52%, before any omitted costs.

Further reading

Educational material, not a recommendation to trade. Numerical examples are hypothetical. CFDs involve leverage and substantial risk of loss. Availability, costs and protections depend on the contract, legal entity, jurisdiction and client classification.

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