The range trading occurs when the forex market is approaching to the resistance line in case of up trend or to the support line in case of down trend. The resistance line and the support line are both important point in technical analysis, and the range trading brings about the battle by buyers and sellers there. On the chart, this battle makes up the small top and bottom in a short run, and the market range is gradually narrowing. Eventually the forex market breaks such a range to one side and it follows building a new stage.
A triangle is shaped by two lines. One is the line connecting tops and another is connecting bottoms. The cross point of these two lines is called as an apex, and the range trading inside the triangle would become less effective after three of fourth to the apex has passed.
There are various shapes of holding but triangle, i.e., flag, pennant, broadening formation and diamond formation, shown in the following charts.
Destructive range breaking
It is often the case that there are placed many stop loss orders just outside the trend line. As bigger is the amount of the stop loss orders executed, the forex market moves more dynamically toward the new stage where the market generates the new trend.