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Chapter 19, Part III. Ranging Market by Indicators.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Oct 13, 2011.

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  1. Administrator

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    Part III. Ranging Market by Indicators. [​IMG]

    Commander in Pips: As you understand from the topic of this part, we will talk about ranging market. Speaking definitely, how different indicators tell us that the current environment is a ranging market.

    Pipruit: But Sir, this is probably will be just an opposite to a trending market…​

    Commander in Pips: Absolutely. This part will be very light in term of education. So, I suppose you can tell me about ranging market and indicators by yourself.

    Pipruit: You think so?​

    Commander in Pips: And why not? We will talk only about that we already know.

    Pipruit: Ok, let’s try it.​

    [​IMG]

    Commander in Pips: Fine, so is your plan – tell first about ranging market – what is it, then describe how ADX, Bollinger Bands and different oscillators behave in a ranging market.

    Pipruit: A ranging market is when price action holds within some range. Also we call such market’s condition as contraction, because all swings do not exceed 1.0 extension from previous ones. Particularly that makes the market stand in the range. Initially the market establishes some high and low price and all consecutive price action holds between them. The high acts as major resistance while the low acts as major support. Market movement itself could be categorized as sideways or horizontal.​

    Commander in Pips: Very good. Let’s pass to ADX.

    ADX in a ranging market

    Pipruit: As we know ADX shows only a trend’s power but not its direction. In the common approach it is treated that a trend increases (gaining power), when ADX moves above 25. When it reaches some highs and turn to decreasing, it means that the trend becomes weaker. When ADX stands below 25 it tells that there is no trend currently, or other words – a ranging environment. Such example we can see on chart #1:​


    Chart #1 | 5-min EUR/USD and ADX (10)
    [​IMG]

    Pipruit: Still, we see that ADX is a bit lagging. Although it shows trend start relatively on time, it lags when the market turns to ranging. See – the market stands in a range a long time, while ADX is still moving down towards 25, shows that trend still holds, although becoming weaker.​
     
    #1 Administrator, Oct 13, 2011
    Lasted edited by : Apr 19, 2016
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