Traders who have experience of Technical Analysis and study charts will be aware of the many price patterns which are created throughout any period of time. One of the most used phrases in trading is “Trade with the Trend” where positions and opportunities are taken in line with the immediate prevailing trend. In essence traders are trying to trade with the prevalent market direction and enter the market on the path of least resistance.
It is generally accepted that a market will move in a trending direction only 20% of the time which leaves a staggering 80% where it has no direction of trend. So what is the market doing 80% of the time?
In real terms the market has reached a decision point where it has no direction and is consolidating its position. Price will have found a barrier where it may not progress further in the immediate direction due to sellers entering the market where once the buyers were more dominant or vice versa.
Essentially a period of Consolidation is found where Price oscillates between two barriers of support and resistance within the market and creates a Trading Range.
Consolidation can be found on any timeframe of chart and their duration can vary from a short period of time to quite lengthy periods. Once the barriers of support and resistance are broken and price breaks out then volatility returns to the market and the move can be quite explosive.
Our recommendations recognize both trending and ranging markets and can capitalize on both market types with equal efficiency!
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