good morning traders and happy holidaysto range bound market conditions this is roger scott an obvious seniorinstructor here at market peaks awhile back we received several emailsfrom our blog readers asking for tutorial range bound market conditions
apple stock price in 1992, if markets are choppy which is anotherway of saying range ballot or trending i figured it during the holidays wouldbe a good time to post a video explaining exactly howto make
choppy market conditions before we begin i have to go through the requiredgovernment disclaimers trending market conditions is not intended to be a tradingrecommendations and all the examples that you see here there is a substantial risk of loss whentrading futures and options on futures please use risk capital and read the required disclaimerscarefully
before we move on okay let me begin by explaining why it's important to determine if market is trending or choppy and then i will explain to differentcharacteristics and show you a few indicators so thatyou can make this determination yourself in the future
one of the biggest reasons why you wantto determine if markets are trending or choppy is because some trading methods andtechnical indicators will not work well with chopped markets and similarly some trading methods andindicators will work they read well with choppy markets but will failmiserably
when markets are trending so before you treat your favor breakoutstrategy you wanna make sure markets are trending and before you apply your favor reversalstrategy you want to make sure the markets are copy otherwise the markets will run all over you lakeand angry train the first thing i look at is visualanalysis with
basic trend lines and the slope of the trend lines most read the markets will have a slope greater than twenty percent either upwards ordownwards an important factor to look at its heart in and fast prices dv from them main trent
more importantly how fast the actually are with the main trent deviation is okay as long as the price snaps back in linewith them need credit line now let's look at choppy marketconditions choppy markets tend to treathorizontally in a trading range without much of a slope price pattern typically goes back andforth
from ohio level pull lower level back-and-forth without much directionalmovement the range maybe tight or why but overall the market tends to staystuck sluggish excuse me and prices typically trips slowly fromthe higher level back down to the lower level back andforth all over and over sakin
and equally effective method todetermine if markets are trending or range bound is to use technical indicators a simple indicator to determine ifmarkets are trending is a twenty bar exponential moving average if the market is trading above thetwenty bar the market is in an up trend and that the market is treating the low twenty bar exponential moving average
the market is in the downtrend now let's look at a good indicator touse when markets are choppy and friendless typically you'd want to use an oscillator these are indicators that measuremomentum and are fairly accurate at measuringshort term overbought and oversold levels of solid indicator technical indicatorsthat works well with choppy markets is
the r_s_i_ indicator this indicator is not overly sensitive and response fairly well to overbought when the indicated jumps about seventy it signals overbought conditions and when the indicator turns belowthirty it suggests that market maybe oversold
for short term market swings i'd preferto use eighty-five bar r_s_i_ timeframe period here's an example oven e-media simpyfutures contract using daily charts with the r_s_i_indicated below the chart you could see by the corresponding eros that the r_s_i_ indicator doesn't goodjob of measuring short term
overbought each time the r_s_i_ gets about seventy the market tends to lose steam andreverse down and each time our site turns below thirty the market tents to rally backup remember the most important part is todetermine if markets are in a trading range or trending before using any type oftechnical indicators
that's it for today's lesson remember to check back weekly for a newtutorials and visit market geeks dot com for professional trading education this is roger scott wishing you happy holidays and the best for the coming new years
