Trending vs Range Bound Markets | Forex Factory

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Trending vs Range Bound Markets

  • #1
  • First Post: Jan 18, 2014 11:23am Jan 18, 2014 11:23am
Trending vs Range Bound Markets

I think one of the two or three great questions to trading is?
What kind of market you are in !
I would like to hear how people determine this question.
I will post how I do it, but I would like to hear from others 1st.

TEB
  • #2
  • Jan 18, 2014 1:07pm Jan 18, 2014 1:07pm
Ok I will put two ways I use to find our if its trend or range

one is very often seen the other is one of my favorite ways

Use

1. A higher MA (EMA or SMA really your choice) ie. 50 100 200
You are in a range is
a. Is the MA flat
b. Is the MA snaking back up and down through the price candles

2. A 20 RSI with the 45 and 55 levels marked on it
a. if price is contained between the two levels its range
b. over up trend
c. below its a down trend
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  • #3
  • Jan 18, 2014 2:33pm Jan 18, 2014 2:33pm
I like this thread topic and discussion, as I trade both being mainly a gold trader I have to encounter these circumstances often.

Here is just a bit.

1. USE higher time frames for analysis then draw down when the market is in range.
2. USE SMA - SIMPLE mas- on H4 +
3. ALWAYS PLOT MAJOR SUPPORT AND RESISTANCE.
4. Lagging indicators CLOG up your screen, waste time and, well PRICE ACTION IS NO. 1
5. Even if you just trade TECHS - ALWAYS BE AWARE OF THE NEWS and Fundamentals behind the trade you are in.
6. When in doubt stay OUT.
7. K.I.S.S.
XAU-XAG/USD_Gold n Silver Trader's Thread = Technicals, Fundamentals & News
  • #4
  • Jan 18, 2014 3:22pm Jan 18, 2014 3:22pm
I wonder why we naturally have a desire to try and predict the future of the market based on it's current condition, it's very rare we see the approach of just participating and accepting what the market gives. If we go with the flow of the market then we can only really lose if price fails to ever go anywhere, at which points would the markets even exist?.

Nearly all systems I see now (including some of my own in the past) the rules are based on fear and impatience, we all think we're natural scalpers, that's bull, being in the market scares us to death and any profit at all must be quickly banked, god forbid a losing session or a losing day.

So trending or ranging is irrelevant really, just wait for the market to move, participate and remain in the market as long as it goes your way, there's no need to determine SR, market condition or anything else technical, in fact, it's all bull, it all gives the edge to the brokers and the big money players, moving to break even, taking half off at 1/1 there's no reason to use any of these daft ideas.

So my answer is, it doesn't matter and you're most likely better off not even considering it, even if you are a trend trader....

here's the last 6 trades I took last week.... did it matter what I thought the condition of the market was?
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tradewith60
  • #5
  • Edited Jan 19, 2014 10:39am Jan 18, 2014 7:08pm | Edited Jan 19, 2014 10:39am
Quoting 60minuteman
I wonder why we naturally have a desire to try and predict the future of the market based on it's current condition, it's very rare we see the approach of just participating and accepting what the market gives. If we go with the flow of the market then we can only really lose if price fails to ever go anywhere, at which points would the markets even exist?. Nearly all systems I see now (including some of my own in the past) the rules are based on fear and impatience, we all think we're natural scalpers, that's bull, being in the market scares us...

you say "So trending or ranging is irrelevant really"

other then when we have a surprise in the market, the markets move slowly in one direction over a long time in a zig zag pattern
the reason that it does, doesn't matter is the vast majority of traders do believe in trend/ranges matter and are watching (as I do)
and so over exaggerate what is happening in the market ie and up is pushed up a dead market turns at extremes
so knowing what most people are looking for is important even if you want to trade against the trend
  • #6
  • Jan 19, 2014 1:10am Jan 19, 2014 1:10am
Quoting TEB63
{quote} you say "So trending or ranging is irrelevant really" other then when we have a surprise in the market, the markets move slowly in one direction over a long time in a zig zag pattern the reason that it does matter is the vast majority of trades do believe in trend/ranges matter and are watching )as I do) and so over exaggerate what is happening in the market ie and up is pushed up a dead market turns at extremes so knowing what most people are looking for is important even if you want to trade against the trend great you show us the 6 best...
The minority move the market, not the majority.

If you really believe it is important what most people are doing, then:

a/ if price is going up, buy
b/ if price is going down, sell

Anything more than that is a complete waste of time, what ever technical analysis you use is as likely to be wrong as right going forward. The minute your rules say it is trending it could end and range, and vice versa.

All i'm suggesting is taking trading down completely to the most simple level, just enter the market with a small amount of risk and let everything run, the few you get right (after all it can only go up or down) will more than pay to the majority of losers.

p.s the chart wasnt my best 6 trades, i was just showing that if you buy when its up and sell when its down, and hold on... eventually price will go one or the other way and you will get paid. It's just time...
tradewith60
  • #7
  • Jan 19, 2014 2:20am Jan 19, 2014 2:20am
You are missing my point
also the markets do range about 85% of the time in markets in general and about 70% of the time in forex
and ranging markets account for almost 90% of the losses in Forex

Who moves the market really is meaningless. I would say in the end only countries and surprises move the market.
But the point is for the most part to know what kind of market you are in
I know a great trader that only trades range.
I know quite a few other great trades that only trade trend.
Personally I only trade trend.

as for reacting to the market
I get in on the retracement so I am reacting to a reaction lol
anyway you have had your say thank you
I would like to hear how people tell what a market is doing

cheers
  • #8
  • Jan 19, 2014 3:12am Jan 19, 2014 3:12am
Quoting 60minuteman
I wonder why we naturally have a desire to try and predict the future of the market based on it's current condition, it's very rare we see the approach of just participating and accepting what the market gives. If we go with the flow of the market then we can only really lose if price fails to ever go anywhere, at which points would the markets even exist?. Nearly all systems I see now (including some of my own in the past) the rules are based on fear and impatience, we all think we're natural scalpers, that's bull, being in the market scares us...
+1
  • #9
  • Jan 19, 2014 3:24am Jan 19, 2014 3:24am
Quoting TEB63
Trending vs Range Bound Markets I think one of the two or three great questions to trading is? What kind of market you are in ! I would like to hear how people determine this question. I will post how I do it, but I would like to hear from others 1st. TEB
My two cents.

The question asked ("What kind of market you are in!") assumes the answerer knows what condition the market he's in (trending or ranging) or at least the answerer believes that the condition he WAS in will continue into the future.

A better question would be "What kind of market WERE you in?" and an ancillary question would be "what condition would have a higher probability of happening from the next bar going forward? Does it continue trending/ranging or will it change form?"
I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #10
  • Jan 19, 2014 3:36am Jan 19, 2014 3:36am
Quoting skenobi
{quote} My two cents. The question asked ("What kind of market you are in!") assumes the answerer knows what condition the market he's in (trending or ranging) or at least the answerer believes that the condition he WAS in will continue into the future. A better question would be "What kind of market WERE you in?" and an ancillary question would be "what condition would have a higher probability of happening from the next bar going forward? Does it continue trending/ranging or will it change form?"

LOL lol
Of course we can know what kind of market we are in to a very high percent
- 85% of the time the market will be in the same kind of trend as it was in the last bar
- 70% of the time the forex mark is range bound
- so only 30% of the time it is trending - were I want to trade
- if it is trending there is an 85% of the time it will keep trending the same way.
so I will trade it
- if you watch MTF its even better
trend trading is really pretty simple and easy
its the MM and the RRR and the stops that are hard
cheers
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  • #11
  • Jan 23, 2014 4:01am Jan 23, 2014 4:01am
have a trend
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  • #12
  • Jan 23, 2014 11:34am Jan 23, 2014 11:34am
Hi TEB63,

I believe the question of whether we're in a trending or ranging market (read: volatility analysis) is absolutely vital to be very successful trading. That doesn't mean you can't be successful if you don't care about what environment we're in, but I am confident you can't be as successful without that knowledge. We know that markets move from stability (lower volatilities, ranging market) to breakouts and trends (higher volatilities, trending market) and back. These patterns will make or break whether you can max out your potential profits (again, the key word there being max).

Quoting 60minuteman
The minority move the market, not the majority.
It's semantics. The majority of the money moves the market-- which itself is often owned by the minority, so you're right in that regard. But either way it's meaningless to most traders.

Quoting 60minuteman
If you really believe it is important what most people are doing, then:

a/ if price is going up, buy
b/ if price is going down, sell
I would recommend doing the exact opposite. Say what you want trying to pick tops and bottoms, but I think using MTF analysis, it's absolutely possible to be very accurate with your trade entries, and this will dramatically improve your returns while limiting risk. If we're in an uptrend on a higher timeframe, I'm buying if price is going down on a lower timeframe and vice versa (in the correct context). Market is fractalized, etc. etc. etc.

Quoting 60minuteman
All i'm suggesting is taking trading down completely to the most simple level, just enter the market with a small amount of risk and let everything run, the few you get right (after all it can only go up or down) will more than pay to the majority of losers.
Judging by the few trades you posted in the thread, I'm not sure you're being consistent. You're saying that you enter with small amounts of risk and "let everything run," but that doesn't appear to be what you're doing at all from the chart you posted.

Quoting 60minuteman
here's the last 6 trades I took last week.... did it matter what I thought the condition of the market was?
That depends on what you mean by "did it matter?" I don't know, did it matter that if you were anticipating either of the breakouts and traded them accordingly, one trade alone would have outperformed your six trades total?

There's a difference between making some profits & maximizing profits. In my opinion, volatility analysis (i.e. ranging or trending) is of the utmost importance to maximizing profits; ranging markets provide good opportunity for multiple low risk, limited return trades consistently for as long as the market remains in that range (like trades 7, k, and 8 in the chart). Trending markets provide excellent opportunity to take low risk, high return trades, but only if you correctly anticipated the start of the trend. Otherwise, entering trades on a market in the middle of a trending market increase your risk ((1) entering at the start of a retracement and getting stopped out, (2) entering near the end of the trend and getting stopped out on the subsequent reversal) and decrease your return.

As for identifying what type of market we're in, I use multiple timeframes and combine wave and pattern analysis with daily ranges, and it becomes pretty obvious. Anticipating when they're going to change from one to the other is a totally different story and not one that I could describe with written word. The closest I can come to answering that is experience and intuition; the market tends to tip its hand before breakouts.
  • #13
  • Jan 26, 2014 12:38am Jan 26, 2014 12:38am
Quoting skenobi
{quote} My two cents. The question asked ("What kind of market you are in!") assumes the answerer knows what condition the market he's in (trending or ranging) or at least the answerer believes that the condition he WAS in will continue into the future. A better question would be "What kind of market WERE you in?" and an ancillary question would be "what condition would have a higher probability of happening from the next bar going forward? Does it continue trending/ranging or will it change form?"


The question itself, "is the market trending or ranging" is bullshit. At any given point in time the market is not trending OR ranging - it is just seeking liquidity, in whichever direction that may take it next. Looking at past data can tell you that the market "trended" or "ranged" to where it is now, but that does not mean it is still doing it.
si hoc legere scis nimium eruditionis habes
  • #14
  • Jan 26, 2014 4:20am Jan 26, 2014 4:20am
Quoting numbnuts
{quote} The question itself, "is the market trending or ranging" is bullshit. At any given point in time the market is not trending OR ranging - it is just seeking liquidity, in whichever direction that may take it next. Looking at past data can tell you that the market "trended" or "ranged" to where it is now, but that does not mean it is still doing it.
And water in the lake and the river are just looking to fill their spaces . While true it's completely useless. You don't fish in rapids and you don't go white water rafting on a lake. Their state of being (historically) and their likely course are relevant to their service.
  • #15
  • Jan 27, 2014 9:06am Jan 27, 2014 9:06am
Trending or Ranging is important to determine which strategy you are going to use. Example: Intraday trending - You can use breakout method. Intraday ranging - You can use bounce back method.

As long as price doesn't break previous swing low, then it is trending up. Until price break previous swing low, then it is to be said that it is ranging or trending down (Provided it break previous swing high). So you can predict the day is range or trend. Please note price slighly break the low or high price doesn't mean to change trend, it has confluence zone.

Example below chart. Just go short at high point since it is down trend until it break the red line (Previous swing high) to change to uptrend. So be smart to short at high, and long at low. 21 & 22 Jan can use ranging method strategy. 23 Jan can use breakout method strategy. If you want scalping or whatever, any system/method that you use can be correct as long as you know whether it is trending or ranging.

My 2cents.

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  • #16
  • Edited 7:38am Jan 30, 2014 7:21am | Edited 7:38am
ok

In markets generally - all markets only trend 15%
Forex Markets trend 2 times more then that on the average so 30%
All markets remain in the trend they are in 85% of the time- weather they are in now Up or Down or Range trend

I think these facts may we worth looking at lol
as trading is only about %
so anyone that thinks this is not important to know ... lol
  • #17
  • Jan 30, 2014 11:38am Jan 30, 2014 11:38am
Quoting TEB63
ok In markets generally - all markets only trend 15% Forex Markets trend 2 times more then that on the average so 30% All markets remain in the trend they are in 85% of the time- weather they are in now Up or Down or Range trend I think these facts may we worth looking at lol as trading is only about % so anyone that thinks this is not important to know ... lol
Agree. I think dedicated range traders can make a killing in their time, nailing repeated range trades until the range is broken (and no that does not necessarily just mean the high or low of the range, it has to be qualitatively broken by a legitimate breakout), while dedicated trend traders can also make a killing shooting for home runs on the occasional break out or initiation of a trend. The ideal would be someone who can trade both, letting only trending trades run and cutting short range trades before they inevitably reverse. Not necessarily easy, which is why I think conventional market wisdom is to be one or the other, but personally I think that's hooey if you're trying to be the best you can be (more cliches )
  • #18
  • Jan 30, 2014 1:47pm Jan 30, 2014 1:47pm
Quoting smittens4212
{quote} Agree. I think dedicated range traders can make a killing in their time, nailing repeated range trades until the range is broken (and no that does not necessarily just mean the high or low of the range, it has to be qualitatively broken by a legitimate breakout), while dedicated trend traders can also make a killing shooting for home runs on the occasional break out or initiation of a trend. The ideal would be someone who can trade both, letting only trending trades run and cutting short range trades before they inevitably reverse. Not necessarily...


trading break outs will kill you !! I do not do that !!
ranges are had to define.

I trade trend and retracements
I believe the easies and I believe the best way to trade
  • #19
  • Jan 30, 2014 2:43pm Jan 30, 2014 2:43pm
Fair enough. Because I always close positions before EOD, intraday breakouts (e.g. the EURUSD today breaking the expanding range of the previous four trading days) are my most profitable single trades, often with a single breakout bringing more returns than multiple successful range fades (I trade US hours so fading ranges tend to be low risk but also relatively low return). But defining a range bound market is absolutely essential for either trade for me.
  • #20
  • Jan 30, 2014 3:30pm Jan 30, 2014 3:30pm
Quoting TEB63
{quote} trading break outs will kill you !! I do not do that !! ranges are had to define. I trade trend and retracements I believe the easies and I believe the best way to trade
If u wait for a single candle confirmation, that is a breakout. Price moving is a breakout of its previous level. It's a continuous breakout.
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