The term day's range refers to the difference between the lowest and highest prices at which a financial instrument has traded during a particular trading session. It represents the range of prices within which the asset has fluctuated throughout the day.
Volatility Assessment: The day's range provides insights into the level of price volatility during a trading session. A wide range indicates higher volatility, suggesting larger price movements and potentially more trading opportunities.
Breakout and Breakdown Points: Breakouts and breakdowns occur when the price moves above a resistance level or below a support level, respectively. Traders monitor the day's range to identify potential breakout or breakdown points. If the price breaks out of the day's range, it may signal a bullish move, while a breakdown suggests a bearish move. On the other hand the day's range can also indicate price consolidation, where the price remains within a relatively narrow range for an extended period.
Trading strategies: Traders use the day's range to determine appropriate levels for setting stop-loss orders to limit potential losses and take-profit orders to secure profits. These levels are often placed beyond the day's range to account for price fluctuations and provide a buffer against market noise. Some trading strategies, such as range trading or mean reversion strategies, are specifically designed to take advantage of the day's range. Traders using these strategies aim to buy near the low end of the range and sell near the high end, expecting the price to revert back towards the mean.