DEFINITION of 'Profit Range'

A range of prices that an underlying security can possess in order for an investment strategy to be profitable. For some strategies, the position taken will have two break-even points. The range between these two points serves as the profit range for the strategy.

BREAKING DOWN 'Profit Range'

When designing a strategy, the profit range is a useful metric for investors when they compare it to the volatility of the underlying asset. It allows investors to match profit ranges with appropriate volatilities. Large ranges should be used with high volatility assets and vice versa. A mismatch of volatility and profit range tends to lead to a loss on the position.

RELATED TERMS
  1. Range

    A stock's low and high prices for a particular trading period, ...
  2. Trading Range

    The spread between the high and low prices traded during a period ...
  3. Volatility Ratio

    A technical indicator used to identify price ranges and breakouts. ...
  4. Volatility Arbitrage

    Trading strategies that attempt to exploit differences between ...
  5. Profit Target

    A predetermined point at which an investor will exit a trade ...
  6. Profit

    A financial benefit that is realized when the amount of revenue ...
Related Articles
  1. Trading

    Range Trade Forex With Non-U.S. Dollar Pairs

    If you are following a range-trading strategy, you're better off with pairs that do not include the U.S. dollar. Find out why.
  2. Trading

    Adjusting Day Trading Strategies For Different Market Conditions

    Being a successful trader means knowing when to play the market and how. Find out what strategies will have you on top.
  3. Trading

    Measure Volatility With Average True Range

    Find more profitable entry and exit locations with this standard indicator.
  4. Trading

    Trade Simple, Trade Smart

    Simplicity can be a trader's best friend. Here is a simple day trading strategy which takes advantage of a stock's dynamics.
  5. Investing

    How To Profit From Oil Volatility With The Following Strategies

    The recent volatility in oil prices presents an excellent opportunity for traders to make a profit if they are able to predict the right direction.
  6. Trading

    Make Better Options Trades With The Average Monthly Range

    We'll show you how to use the average monthly trading range to score better returns.
  7. Trading

    Range Bar Charts: A Different View Of The Markets

    While range bars are not a type of technical indicator, traders can employ this useful tool to identify trends and interpret volatility.
  8. Trading

    When Not To Trade

    When conditions arise where systems are likely to perform poorly, traders must exercise discipline and cease trading.
  9. Trading

    An Option Strategy for Trading Market Bottoms

    The reverse calendar spreads offers a low-risk trading setup that has profit potential in both directions.
  10. Trading

    How To Profit From Volatility

    We explain four key strategies to profit fom volatility in markets.
RELATED FAQS
  1. What are the most common examples of Range-Bound Trading strategies?

    Learn some of the most common indicators and strategies that traders implement to generate profits from trading a range-bound ... Read Answer >>
  2. What is the difference between profitability and profit?

    Calculating company profit and profitability are not one and the same, and investors should understand the difference between ... Read Answer >>
  3. What is the Volatility Ratio formula and how is it calculated?

    Understand what the volatility ratio indicator is, how it is calculated and the way this technical indicator is used by traders ... Read Answer >>
  4. What are the top technical indicators used for Range-Bound Trading strategies?

    Learn how to identify when a market is range bound and what some of the technical indicators are that work best for trading ... Read Answer >>
  5. Why is the Volatility Ratio important for traders and analysts?

    Read about the rationale behind Jack D. Schwager's volatility ratio, which compares recent trading ranges with historical ... Read Answer >>
  6. What does break-even analysis tell a business about its shutdown point?

    Learn what a break-even analysis tells a company about its shutdown point, and understand why a company's break-even point ... Read Answer >>
Hot Definitions
  1. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  2. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  3. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  4. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  5. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  6. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
Trading Center