What are you all using to help determine when a trending market has started consolidation and maybe headed into a consolidation or range? Thank you!
This is an important question. Most money is made by most traders in trends: for most, consolidation periods are losing periods.
I use 20 and 50EMA as first confirmation of a trend/consolidation. If they are in the wrong sequence with price, that is a warning signal.
So also is the overlap of weekly candles. If more than 3 of the latest weekly candles are overlapping, that’s another warning signal.
I also look at the swing highs and lows. If price and the 20 and 50EMA’s are bullish but the swing highs and lows are forming a falling sequence, that’s another warning signal.
Some pairs are historically very low volatility. I think this means they are more prone to ranging (I have no data to prove this) and therefore less rewarding to trade. For example, AUD/NZD, EUR/CHF, AUD/CAD etc.
The system I use pretty much relies on EMAs too. But rather than 20 and 50 EMAs, I use 50 and 200 EMAs as dynamic support and resistance.