~ Week Of June 6th 2016 ~
Identifying The Market Type
Published by Jay - June 4th 2016
To be a successful trader it's important that you are able to identify what type of market is currently in place on any given pair. Is the market in a strong trend up or down, is it consolidating, or is it contained within a range? Having the ability to correctly determine market conditions means that you are one step closer to becoming a profitable trader.
One of the hardest markets to trade can be the ranging ones, where price moves in a sideways fashion. Considering the Forex market spends a considerable amount of time in a range bound situation, it's good for a trader to have in their arsenal the knowledge of how to profit from these conditions.
As you can see from the daily chart of the GBPJPY below, it's clear from the price action that the market was previously in a downtrend. However, it's now currently contained within a range and has been so for the last couple of months. On the 31st of May,as price hit the top of the range, the market told us to sell this pair. A nice move down resulted from this confirmation. With price heading back toward the range low, it's possible we will get another signal to buy into the GBPJPY.
If the market continues to move with this nice downward momentum in the trading week ahead, it will mean that there will be minimal traffic and congestion to the left, thereby giving price an easier path up if it respects the range. For now we will patiently sit on the sidelines and wait to see what happens with this pair.