Alex Spiroglou, CFTe, DipTA (ATAA)
Independent Analyst
Identifying ranging and trending markets
The challenge for traders and technicians is to define and distinguish between a ranging market and a trending market.
This section explores the difficulty of defining these market conditions in a rules-based quantitative way.
Defining ranging and trending markets
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Traders face the challenge of defining or identifying ranging and trending markets.
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The goal is to define these market conditions in a rules-based quantitative manner.
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Real-time identification of these market conditions is crucial.
Using corn futures chart as an example
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The highlighted yellow area on the chart represents a trading range in corn futures.
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Visually identifying this range is relatively easy with hindsight, but real-time identification is more challenging.
Utilizing the MACD-V indicator
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The MACD-V indicator can be used to identify ranging markets.
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One of the 7 Core Ranges within the MACD-V indicator is specifically designed for this purpose.
Rule for identifying ranging markets with MACD-V
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According to the rule, when the MACD-V indicator stays between -50 and 50 for more than 25 bars, it indicates a ranging market.
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The MACD-V indicator oscillates around zero when there is no significant upside or downside momentum in the market.
Real-time application of ranging market definition
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Point A represents where the MACD-V indicator crossed above -50, indicating an upward trend.
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Point B represents where the 25-bar rule was satisfied, confirming a ranging market condition.
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From point B onwards until the end of the highlighted area, we can consider it as a real-time definition of being in a trading range.
Importance of using tools like MACD-V
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The MACD-V indicator provides valuable insights into identifying ranging markets.
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It helps traders make informed decisions based on real-time data analysis.
Conclusion
The MACD-V indicator and its specific range rules can be used to define and identify ranging markets.
This section emphasizes the importance of using such tools for real-time market analysis.
Utilizing MACD-V for ranging market analysis
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The MACD-V indicator's range rules are effective in identifying ranging markets.
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Traders can use this information to make informed trading decisions.
Benefits of real-time definition
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Real-time identification of ranging markets allows traders to adapt their strategies accordingly.
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It provides a quantitative approach to understanding market conditions.
Final thoughts
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Understanding the difference between ranging and trending markets is crucial for traders and technicians.
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Utilizing tools like the MACD-V indicator helps in defining these market conditions accurately on a real-time basis.
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Editors’ Picks
EUR/USD climbs toward 1.1800 on broad USD weakness
EUR/USD gathers bullish momentum and advances toward 1.1800 in the second half of the day on Tuesday. The US Dollar weakens and helps the pair stretch higher after the employment report showed that Nonfarm Payrolls declined by 105,000 in October before rising by 64,000 in November.
GBP/USD climbs to fresh two-month high above 1.3400
GBP/USD gains traction in the American session and trades at its highest level since mid-October above 1.3430. The British Pound benefits from upbeat PMI data, while the US Dollar struggles to find demand following the mixed employment figures and weaker-than-forecast PMI prints, allowing the pair to march north.
Japanese Yen seems poised to appreciate further; awaits BoJ decision on Friday
The Japanese Yen maintains its bid tone through the first half of the European session on Tuesday which, along with a bearish US Dollar, keeps the USD/JPY pair depressed below the 155.00 psychological mark. The growing acceptance that the Bank of Japan will raise interest rates this week turns out to be a key factor behind the safe-haven JPY's outperformance.
Editors’ Picks
EUR/USD climbs toward 1.1800 on broad USD weakness
EUR/USD gathers bullish momentum and advances toward 1.1800 in the second half of the day on Tuesday. The US Dollar weakens and helps the pair stretch higher after the employment report showed that Nonfarm Payrolls declined by 105,000 in October before rising by 64,000 in November.
GBP/USD climbs to fresh two-month high above 1.3400
GBP/USD gains traction in the American session and trades at its highest level since mid-October above 1.3430. The British Pound benefits from upbeat PMI data, while the US Dollar struggles to find demand following the mixed employment figures and weaker-than-forecast PMI prints, allowing the pair to march north.
Gold recovers above $4,300 as markets react to weak US data
Gold trades in positive above $4,300 after spending the first half of the day under bearish pressure. XAU/USD capitalizes on renewed USD weakness after the jobs report showed that the Unemployment Rate climbed to 4.6% in November and the PMI data revealed a loss of growth momentum in the private sector in December.
US Retail Sales virtually unchanged at $732.6 billion in October
Retail Sales in the United States were virtually unchanged at $732.6 billion in October, the US Census Bureau reported on Tuesday. This print followed the 0.1% increase (revised from 0.3%) recorded in September and came in below the market expectation of +0.1%.
Ukraine-Russia in the spotlight once again
Since the start of the week, gold’s price has moved lower, but has yet to erase the gains made last week. In today’s report we intend to focus on the newest round of peace talks between Russia and Ukraine, whilst noting the release of the US Employment data later on day and end our report with an update in regards to the tensions brewing in Venezuela.
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