How to determine if a market is ranging ?

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Thread: How to determine if a market is ranging ?

  1. #1
    Administrator funyoo's Avatar
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    Sep 2008

    Default How to determine if a market is ranging ?

    According to your experience, what is the best indicator to help you to determine if the maket is currently ranging?

    Of course we could see it with our eyes, but when we use an automated trading code, we need to automatically filter the periods where the price is ranging.

    Some ideas : the volume comparing to its average, the bollinger bands (distance between high and low, divergence-convergence), the macd, ... what is the most accurate tool ?

  2. #2


    if there was an such indicator its probably a secret?

    i like 3 sma filter ie when 3 sma in order = trend, when 3sma mixed up =range

    if trend = higher high etc. so if not true then = range?

    range happens after trend move. trend -range -trend- range as market moves in steps up or down. so maybe easier to look for a trend condition and when trend condition not true then = range ?

    so negative answer to trend must = range?

  3. #3


    When a 20,2 Bollinger Band has gone inside a 20,1.5 Keltner Channel, you could consider the market in Range. This is the same concept behind the BBSQUEEZE indicator that is out there.


  4. #4
    Join Date
    Jan 2009


    The damiani volameter filter out the non-trending phase with red line.
    Attach also his instant trendline for see if the system is trending.
    Attached Images Attached Images How to determine if a market is ranging ?-gold-png 
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  5. #5


    You can look at the ATR (Average True Range). Of course this fluctuates and must be seen relative to its recent move (given said time frame); but I find it the best way to manage my EAs. I govern them to stay clear of disaster and feed off the range. But because I am not the greatest coder in the world I run the EAs on a demo and manually trade alongside using these pretty basic tips.


    How to Money Manage with the Day Trader's Seven Best Tips |

    And sins:

    How to Avoid the Day Trader's Seven Deadly Sins |

  6. #6
    Junior Member
    Join Date
    Jan 2009


    I think RSI can be useful:
    RSI>60 Strong uptrend
    RSI<40 Strong downtrend
    RSI in between 40-50 weak downtrend
    RSI in between 50-60 weak uptrend

    Or ADX can be useful.

  7. #7
    Junior Member
    Join Date
    Feb 2009

    Default fxlovers BB trading system

    i used bb20 and bb50
    market ranging when the upper and lower bb20 is outside upper and lower bb50, and bb50 is flat.
    with those indicator we can determine the condition of market (ranging and trending)
    i have been used this system for a half year and the result is very good.

  8. #8
    Junior Member
    Join Date
    Jan 2009


    ADXcellence concept is simple but very good: ADX/ DMI with Dr. Schaap's Rules for the Road to Profits

  9. #9
    Junior Member
    Join Date
    Sep 2009


    I agree with the sentiment that one expects a range after the trend as part of consolidation. I have few ways of identifying the trend. These are:

    The middle bollinger line which is basically SMA is flat or moves through a very small angle.

    A range should not be confused with a thin market. In a thin market with little volume you are more likely to have a range like behaviour.

    In a range the ichimoku cloud tends to be very narrow. This is similar to the three bollinger lines converging.

    The RSI will also be moving around 50% area with no particular inclination.

    if ADX happens to be below 20% then that shows sideways or range movement

    In a forex trading I guess an hour chart say on GBP/USD will show range far firmly compared to a 10 min chart.

    To guess the depth of a range I tend to draw a horizontal line touching the highest wick and another line drwan touching the lowest wick in the candle chart for all candles that comprise the range ( 1 hour chart). The pips difference between these two lines will tell me the hight of the range and likely profit range


  10. #10


    In currencies, the driving factor is interest rates and news. So, look at the news coming out. If there is no major news coming out for that pair. The pair will probably trade sideways, or has a greater chance of ranging.

    BTW why not develop a method of trading that takes advantage of ranging markets? There are several, like a Bolinger bands method or using a STD Deviation channel and trading to the mean, or a Grid system. If they are not completely profitable, at least they will mitigate your losses of the some what short sighted bought system.

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