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Range compression

Indicator · Intermediate · Daily bars

A day's range contracts below the N-day average — arm a breakout, because expansion follows contraction.

Quiet days don't stay quiet. When range shrinks below normal, energy is building — you bracket the bar and let the market pick the direction.

How to trade it

  1. Setup: Spot a compression day — today's range is unusually small compared to the recent average (or the narrowest of the last 7).
  2. Entry: Next day, bracket both sides: buy stop at the compressed bar's high, sell stop at its low.
  3. Stop and exit: Stop on the opposite side of the compressed bar. Exit at target or trail the winner.

Why it works

Volatility is cyclical: quiet begets loud. A tight range is coiled energy — expansion reliably follows contraction. Because the pre-breakout range is small, your stop is tight and reward:risk is high.

Watch out for

It's a condition, not a full signal — always pair with the range-break order. False breaks are common right after compression.

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Popular markets for this pattern: Gold, Crude Oil, EUR/USD, Corn, Coffee, Oats, Lumber, Feeder Cattle, Copper, Natural Gas, GBP/USD, USD/JPY, AUD/USD, NZD/USD, SPY, QQQ, IWM, DIA