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
- Setup: Spot a compression day — today's range is unusually small compared to the recent average (or the narrowest of the last 7).
- Entry: Next day, bracket both sides: buy stop at the compressed bar's high, sell stop at its low.
- 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