trading range

Why does this share price keep going up a little, then down a little, and never seem to go anywhere? That is the question a lot of new investors ask when they check their portfolio app every day and see the same stock dancing between two numbers without ever really moving.

What you are looking at is called a trading range. It simply means the stock has a ceiling it struggles to break above and a floor it struggles to fall below, and for now it keeps bouncing between the two, like a football stuck between two defenders who refuse to let it pass.

Take a Nigerian example. Say shares of a bank on the NGX have spent the last two months trading between ₦28 and ₦32. Every time it climbs near ₦32, sellers show up and push it back down. Every time it drops near ₦28, buyers step in and push it back up. That whole zone, ₦28 to ₦32, is its trading range.

In London, the same thing happens with shares on the FTSE. A company might sit between £4.10 and £4.40 for weeks because the market has not decided if it deserves a higher price or a lower one. It is not stuck forever, it is just resting while investors wait for fresh news, like earnings or an interest rate decision, to push it one way or the other.

For someone in the diaspora sending money home to invest for a relative, a trading range is worth knowing because it stops you panicking. If your sister's stock in Lagos falls to the bottom of its usual range, that is not always a disaster, it might just be doing what it always does before bouncing back up.

Traders actually use this pattern on purpose. They buy near the floor and sell near the ceiling, over and over, until the range finally breaks, one way or the other, and a new story begins.