Trending vs. Ranging Markets

Understanding the environment of the overall market around you is the only true way that you can
make the kind of progress you need when you are attempting to trade the markets.

There are situations when the market is very choppy and not useful for traders who are attempting
to make the most profitable trades possible. Then there are other times when things are trending
smoothly and it is easy to understand what is happening. It is so important to know which kind of
environment you are currently in so you don’t make moves that are ill-timed.

Trend-Based or Range-Bound

One of the simplest differences that one can tell between the different types of markets that one may encounter is the difference between range-bound and trend-based markets.

Trend-based markets are markets where it is easier to get in on trades based on the specifc trends that are
present at any given time. People tend to trade these markets by getting in on whichever side of the trend they
believe is moving most powerfully.

Range-bound trading strategies can also work for some traders, but they are sometimes more difcult to pull off for the simple fact that you never know exactly when a range-bound market may become a trending market.

In either case, it is essential to understand what kind of market you are operating in so you don’t end up placing trades that don’t make sense given the market that you fnd yourself in.

You can use a number of powerful tools that are at your disposal such as trend lines, Fibonacci indicators, and
other tools that can help you fgure out where you are in terms of a trending market, a range-bound market, or
some other conditions that you need to be aware of in the market.