Scope trading is based on the concepts of support level and resistance. On a price behavior chart, support and resistance levels can be defined as the highest and lowest points touched before a price reversal. Taken together, these support levels and resistance create a grid chart of trading ranges.

In a trend market, prices will continue to break through previous resistance levels (forming higher and lower trends), forming a stepped support and resistance level. In the scope market, prices fluctuate horizontally and remain between established support and resistance thresholds.

When the price reaches overbought (resistance level), the trader predicts a reversal is imminent and then sells. Similarly, when the price reaches an oversold (support level), it is considered a buying signal. Finally, if prices break through these established boundaries, it is also a signal that new trends may take shape. Range traders are not very interested in predicting breakthroughs (which instead appear in trend markets) and are more interested in random fluctuations in prices between resistance supports, without extending a trend in one direction during the period.

Tools used

Range traders use support and resistance prices to determine when to enter and exit, as well as how large a position to open. To do so, they usually use momentum indicators, such as random indicators and RSI, to identify overbought and oversold conditions.

advantages and disadvantages

The scope market trading strategy may be a sustained and highly rewarding strategy. Because traders only focus on capitalizing the current trend rather than predicting it, there is also lower associated risk. That is to say, time is unique and important. Usually, an asset will continue to be overbought and oversold for a period of time before the reversal. In order to take on less risk, traders must wait to enter a new position until the price reversal is determined.