Hardly a day will pass without me seeing requests from my blog readers or Telegram followers to give a detailed explanation of what range break indices are. So today, I have decided to utilize this medium to explain what range break indices are.
If you are an inexperienced financial trader, you need to get your feet wet with the necessary knowledge about range-break indices before you start trading it to avoid much losses.
Today, I will explain what range break indices are, how they work, their type and where you can find them.
Having said that, let’s get started.
Table of Contents
What is Range Break index?
A range-break index is a synthetic index that is identified with price fluctuation within two boundaries called “borders”, with the price of the asset occasionally breaking above or below the border to form another range.
Before you can get this clearly, you need to understand what a ranging market is.
A ranging market is a market where the price fluctuates back and forth between a higher and lower price level. This type of market cannot be justified as being in an uptrend or downtrend.
For instance, if we are trading an asset and the price keeps recording a $10 maximum price and an $8 minimum price overtime, the market is said to be ranging.
While this market is ranging, the upper price point($10 in this case) is taken as the resistance level and the lower price point($8 in this case) is the support level. So, in range break indices, the resistance level and the support level form the upper boundry and the upper boundry of the border.
Also Read: Best Synthetic Indices to Trade
How Does Range Break indices Work?
In clear terms, range break indices work by forming a ranging market at some point and then spiking up or down to form another ranging market at a higher or lower zone.
A consecutive price breaking above the border(resistance level) of the ranges results in an uptrend being formed, while a consecutive price breaking below of the ranges results to a market in a downtrend.
Range break indices, like the boom and crash indices, are known for sudden price spikes that can cover up to 50 pips in a short period of time. So, if you are looking for an asset that will give you a high profit within a short period of time, then range break indices are a good option for you.
However, I must point out that, without a good risk management system, this asset can blow your account if the market goes against you.
Also Check: Best time to Trade Synthetic indices
Range Break indices Examples (Tradable assets)
There are two tradeable assets in the range break index market; the Range Break 100 index and the Range Break 200 index. These indices classification is based on the number of times it touches the borders of a range before breaking above or below.
1). Range Break 100 index
The price of this index hits the border average of 100 times before breaking above or below the border to form another range.
Note: 100 is an estimation; it does not mean you need to count 100 price hits on the borders before you expect a breakout from the range.
2). Range Break 200 index
This index fluctuates more in a range before breaking above or below the border. Basically, it hit the borders an average of 200 times before breaking out of the range to form another.
Range break index chart.
The look of the range break index chart depends on the timeframe you are working with. If you are working with a higher timeframe like a 4h timeframe, a 1D timeframe, or a weekly timeframe, the boundary shape formed by the ranging zone of this asset becomes insignificant (invisible).
So, when you are looking at the range break index chart at a higher timeframe, you will see that the chart is almost the same as the chart of a traditional financial instrument.
Here is the range break index chart on the higher time frame.
On the other hand, when viewing the range break index chart on a lower timeframe, the border formed by the boundries of the ranging zone of the chart becomes more significant. So, in this lower timeframe, you will notice how fast prices can move when they are breaking a range and how long they can fluctuate within a range.
Where can you trade Range break index?
As far as I know, Deriv is the most popular and trusted broker that offers range break indices to its users. On Deriv, you sign up and deposit as little as $5 to begin trading. Furthermore, Deriv has a demo package that you can opt for and use to practice before investing your real money.
If you don’t have an account with them before, you can sign up here.
Also Check: How To add Synthetic indices to Tradingivew
Range Break Trading hours.
The range break indices, just like any other synthetic index, can be traded 24/7. This is because they are not real world assets and therefore not affected by fundamental factors. So, range break indices are solely dependent on the program they are coded with and the program runs 24/7.
The precise definition of range break indices is that they are synthetic indices identified with price back and forth movement within two boundaries called borders, with price occasionally breaking above or below the border to form another range.
With this definition and the above illustrations, I know you now have an idea of what range break indices is .
If you have any questions regarding this article, you can leave them in the comment section below. I will do my best to answer them.