How to calculate an expected range for the market?

Last Updated: 14 Oct 2025

Information about expected monthly range can be used by people who trade in derivative markets, especially the options traders as Implied volatility can be used to calculate the upper and a lower range of an underline derivative security. Option writers can use this expected monthly range to short the options above or below the expected monthly range, while Plain-Vanilla option buyers can use this upper and lower range to create spread positions i.e. Bull-Call spread, Bear-Put spread, Ratio spread etc in order to reduce their entry-level cost on their Plain-Vanilla positions.

How to do trading legend range calculation?

Since IV is a Standard Deviation. So, for a 1-month range calculation:

Range calculation formula:

Expected Movement = Current market price* IV * Square root of (Days left to the expiry/Days in a year)
Expected Movement = 10226 (Nifty November expiry level)
*12%(Nifty IV level)*Square root of (28/365 ), which is 339.8 Points.
So we can expect a movement of +/- 340 points from the current level for the Nifty index in the month of December. An expected upper range will be 10566 and lower range will be 9886.

Steps to Calculate Market Expected Range

1. Determine period (daily, weekly, monthly).
2. Collect price data (high, low, close) or use implied volatility from options.
3. Compute the basic or adjusted range (ATR, VIX-based, or support/resistance-based).
4. Confirm with technical indicators (RSI, ADX, Bollinger Bands).
5. Integrate into trading strategy:

• Buy near support / sell near resistance (range trading).
• Deploy breakout trades if price breaches calculated range with volume confirmation.

Tools and Indicators For Range Calculation In Trading

Range trading focuses on identifying price levels where an asset oscillates between horizontal support (floor) and resistance (ceiling). Accurate calculation and recognition of this range is essential for timing entries, exits, and stop-loss placement. Below is a detailed review of widely used tools and indicators:

Average True Range (ATR)

• Purpose:

Measures market volatility over a specific period (commonly 14 periods).

• Application in Range Trading:

Low ATR values indicate low volatility → likely range-bound conditions.
ATR multiples help dynamically set stop-loss and take-profit levels relative to the current range.
Helps to avoid entering during false breakouts or overly tight ranges.

• Calculation:

ATR= Moving Average Of TR (True Range)

Remarks

As per IV calculation, the NIFTY range for December is 10566 to 9886.

Range calculation success ratio with the help of IV until November is 8:3 i.e (Out of 11 months in 2017, only 3-months have seen an expiry above or below calculated range)

Frequently Asked Questions

Q1. How accurate is range calculation in trading for short-term markets?

Range calculation using tools like ATR and ADR is fairly accurate for short-term trading but should be used with other indicators.

Q2. Can traders use Nifty weekly range for intraday strategies?

Yes, traders often use Nifty weekly range estimates to guide intraday strategies, especially around expiry days.

Q3. Which indicators are best for expected market range calculation?

ATR, Bollinger Bands, Donchian Channels, Implied Volatility, and Predictive Range Indicators are top tools for calculating expected market ranges.

Q4. Is trading legend range calculation suitable for beginners?

Trading Legend’s range calculation can be suitable for beginners due to its guided structure and simplified mechanics.

Q5. How does volatility impact expected market range?

Higher volatility expands the expected market range, increasing both risk and opportunity for traders.