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: US Dollar to remain pressured until uncertainty fog dissipates
Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY gathers strength to near 157.50 as Takaichi’s party wins snap elections
The USD/JPY pair attracts some buyers to around 157.45 during the early Asian session on Monday. The Japanese Yen weakens against the US Dollar after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.
Editors’ Picks
USD/JPY gathers strength to near 157.50 as Takaichi’s party wins snap elections
The USD/JPY pair attracts some buyers to around 157.45 during the early Asian session on Monday. The Japanese Yen weakens against the US Dollar after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.
Gold: Volatility persists in commodity space
After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.
AUD/USD eyes 0.7050 hurdle amid supportive fundamental backdrop
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms
US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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