Technical Analysis Basics: Trends and Ranges


Trends and Ranges

Traders use trends and ranges extensively in the financial markets, and Forex traders are no exception. Markets are normally either trending or ranging.

A ranging market happens when the price is moving up and down within a horizontal channel, but over time is predominantly moving sideways. A market is trending when the price moves in an upwards or downwards channel. See Figure 3.

Figure 3
Trends and ranges
Charts: trends and ranges
 © forexop

Trends and ranges, combined with support and resistance are the basis of most trading techniques. Range traders, trend traders, and breakout traders all use a combination of these indicators to time their entry and exit points.

To identify trends, traders use visual inspection, as well as automatic indicators such as the Average Directional Index (ADX).