Markets do not always behave the same way
Price can move in sustained trends, remain inside ranges, or become unusually volatile around important events.
Before applying a strategy, traders should consider the environment in which the market is currently operating.
- Trending markets
- Range-bound markets
- High-volatility markets
- Low-volatility markets
- Event-driven markets
Trend conditions
A trending market generally shows persistent movement in one direction. Traders may look for strategies that attempt to participate in that directional movement.
Trend conditions can change, so traders should avoid assuming that an existing trend will continue indefinitely.
Range conditions
A range occurs when price repeatedly moves between identifiable support and resistance areas without establishing a sustained directional move.
Range-based strategies focus on the behavior of price around those boundaries rather than assuming a strong trend.
Ready for the next step?
Review what you learned, then continue through the Trading Strategies course.