LESSON: Ranging Markets
Forex markets spend their time ranging, consolidating and moving sideways far more than they do in trending markets.
Whilst we would always prefer to make trades within trends because they offer both momentum we can use in our favor and we can also use this to manage our trade as you will learn later in the course; we need to know how to play ranging markets.
What are the Differences?
The number one difference traders must realise when trading ranging markets is that their trade length is going to be potentially much shorter than if they were trading with the trend.
When you are trading in a range, there are many Support and Resistance zones that must be managed, however when trading with the trend it is much easier to place the trade and just ride the waves.
When trading a range you MUST realise that capital protection is key to coming out on top.
Because of the tendency for price to whipsaw at tiniest support and resistance areas you must have a strong trade management plan and you must stick to it.
Your First Support Area = FSA and First Resistance Area = FRA are crucial when trading within a range or tight consolidation area. I discuss these a lot more coming up soon and how to use them with different market types, but within ranging markets we need to keep in mind that price is going to respect minor levels a lot more.
The following chart shows and example of a ranging market. Notice how price just chops up and down with no defined momentum either way.
Module Three
Duration: 4 mins
Module Progress:
80% Complete
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