determing trending or ranging market
Hi I have different strategies for trading either market, however, my biggest problems are determining which market we are currently in.
My methods are simple using support and resistance lvls. The whole idea for me is to try to get 30-45 pips each trade and my sl is the same lvl. It works for me because my winning trades outnumber my losing trades but my losing trades are usually because of my mistakes on determing market.
I saw in another forum someone had the same problems and the answer was that whenever there is major news the markets will start to trend, whenever there isn't any news they will range. What is your opinions on this matter and is there any other relevant advice you can offer? Thanks in advance.
ps. Please no generic "you will get a feel for the market" answers or "you shouldn't be trading if you don't know".. they are just obnoxious and pointless. Thanks again
I'm new to BabyPips.com and Forex, but I "think" I know what you're asking.
To get a quick idea of what trend I'm in, I look at the day chart and blow it out to see if there's a clearly visible trend (like the EUR/USD) is right now.
I also look at 10,50,200 EMA on this chart. Basically, I look for a perfect order of:
200,50,10 for a downtrend.
10,50,200 for an uptrend.
The EUR/USD is in a downtrend. Looking on the daily chart, it's easy to see that since Dec 09, it's going down. Also the 4-hour chart over the past couple months shows this.
Should point out that for Forex, I'm more interested in longer trades verses popping in and out of positions all day long. So, looking for how the pair is trending today might be a little different (I'd still look for the perfect EMA order). When I looked earlier, there was a lot of sideways action.
But this is what I used to sell the EUR/USD yesterday. I don't fight trends.
Anyway, hope I'm not too far off from your question.
Even on shorter time frames it is NOT true that the markets only trend when there is news and range when there is not.
That sounds like someone who is inexperienced, and is describing momentum from news reaction.
Thanks RebelRed for the descriptive response. I'm going to try out your method now.
@Phoenix, I think he meant as a rule of thumb and news would break the market from ranging or something along those lines. Personally I tend to only trade patterns and s/r but the idea was intrigueing. So apparently this week there's going to be some major news and I want to see if this has the effect I was looking for.
See this post of mine:
Article: Forex: Identifying Trending And Range-Bound Currencies
Oddly enough this arrived in my inbox only this morning.
Try drawing horizontal lines around areas of support/resistance and trend lines. That should help give you s clearer picture of what's going on.
I don't think there is a "hard" switch that can tell when the market is trending or ranging, like an on/off button. However, you may be able to gauge when the market starts trending and when the market starts ranging by using 2 different settings of indicator suited for indicating trend strengths. Among many indicators are:
- MT4 standard indicator: such as ADX, Bollinger Band, Moving Average, CCI
- MT4 custome indicator: such as BBSqueeze (Google it and you'll find several versions from different sources)
I saw a quite interesting approach by using Keltner Channel and Bollinger Band:
- If Bollinger Band is inside the Keltner Channel, then the market is considered in ranging condition
- If Bollinger Band is outside (breaks above or below) the Keltner Channel, then the market is considered trending.
But once again, it's not easy to find the appropriate settings that can become a "hard switch" to determine market environments, because the market simply doesn't switch between market environments in an instant. Rather, there are "transition periods" between trending to ranging and vice versa. For example, you may find a ranging period within a trending market, where the overall price move is still trending in one direction but the market loses its steam.
Back to using 2 different settings for the same trend strength indicator, I personally apply the first setting to be quicker in picking up the start of a trending market, and the second setting to be quicker in picking up the start of ranging market.
And here is how I interpret it:
- If both indicators (same indicators with different settings) shows trending market condition, I would interpret it as a confirmed trending market and use a trend following system for any trade opportunity.
- If both indicators shows ranging market condition, I would interpret it as a confirmed ranging / sideways market and use a turn-trade system for any trade opportunity.
- If the trend indicator shows trending market condition, while the range indicator shows ranging market condition, I would interpret it as "the market looses its steam". More likely this is either a retracement or just a weak trend with higher risk of entering with trend following system. This is probably a "grey area" as well, where I think one should sit on his/her hands and wait for a more confirmed market environment before entering the market with a particular trading system.
Anyway, this is just an idea. There are many ways to gauge market conditions, and different traders may prefer different approach.
All the best with your trades
You can quite easily determine if it's trending or ranging just by looking at the chart, if it's heading in one direction or another it's trending, if it's up and down all over the place it's ranging.
Keep It Simple Stupid
No kidding!!! LOL!!!
Originally Posted by purplepatchforex
I don't know why this 'corpse thread' got resurrected but, I have to say, that wing9577 makes some interesting observations. The only problem, of course, being that all suggestions made (indicators) lag EVEN, unfortunately, Wilder's ADX. Most times: by the time those indicators have indicated that a market is trading in a range the market is about to break out of the range and visa versa when it's trending. To be fair (biased??? LOL!!!): in the case of Wilder's ADX, when a market has been trending, and the trend is about to pause or a reversal of the trend is imminent, ADX is almost 100% accurate at indicating this i.e. the very first downturn in ADX (daily charts, ADX(14)) indicates this, as I say, almost without fail. Put another way: ADX is far quicker to indicate the pause or imminent reversal of the trend than it is in indicating the beginning of a trading range.
In my opinion: the person that can predict the beginning of a trading range within a bar or two has not been born yet (neither has the computer or the indicator capable of doing this been developed yet).
So for what it's worth: I've stopped even trying to differentiate the difference between the two (and believe me when I say I honestly believe I've tried every indicator 'known to man' that is SUPPOSEDLY supposed to indicate the absence or presence of a trading range) i.e. either trade a system that is functional (dare I say 'profitable') in BOTH types of markets (it will have you stop and reverse within the range but follow the breakout and the resulting trend) OR trade a system where the stops are wide enough to keep you in your position while the market is trading in a range until either the trend continues or reverses 'for real'.
I've been trading and investing in the stock market for the past 7 year by the help of bloomberg website ticker and graph..
I can usually determine my stock security if it is overbought or oversold this indicate if it will going up or down..
Last edited by smiley2011; 05-30-2011 at 11:35 AM.
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