Determining Market Condition

Hello New Digital World,
When I refer to "market condition", I am talking about direction and volatility of the underlying.

Ways to determine direction:
1) Take the price change that occurs over a week and divide it by price. The resulting number(normalized) can then be compared to ranges that indicate bull, bear, neutral. OR

2) You can use a displaced moving average of the highs and lows but displaced forward. You would then compare the current price to this forward channel. Ie if the price is above channel than bullish, below channel bearish and in the middle channel neutral. OR

3) You can use 2 sets of simple moving averages. When both SMA’s faster MAs are above the slower, then bullish. When both pairs of MA’s fast lines are below the slow MAs, then bearish. If there is conflict between the 2 pairs of MA, than neutral.

Ways to determine volatility:
1) Take the ATR of the underlying and divide by price. Then use this number relative to ranges to determine volatile, quiet, normal for the underlying.


My question to the board is: does anyone have better or different ways to identify direction and volatility for an underling market?

Thanks,
Trading2013

There are a lot of methods to determin the market condition (Market condition thread is this one).

I like Ichimoku indicator and AbsoluteStrength indicator.

But some people are using MA indicator (SMA with the period 200 for high timeframes, and with period 50 or 55 for timeframes less than H1 - on the way as 'price above/below SMA for bullish/bearish).

The other simple method is Pivot: price above/below pivot line.

I remember famous system created by ramdas for market condition :

and MA channel trading system :

We can use MACD or Stochastic for example ... But I like Ichimoku and AbsoluteStrength

Talking Points:

• In the absence of a trend, trade market ranges
• First identify key levels of support & resistance
• Manage risk with a stop, in the event that price breaks

Many traders consider themselves trend traders. But what happens when the market loses its direction? Instead of being deterred by sideways price action, traders should develop a plan of action for ranging markets. Today, we will review how to identify a trading range, and an easy way to approach trading trendless markets. Let’s get started!

Find The Range

The first task of range trading is to find the range! This process can be easily done by connecting a series of highs and lows with a horizontal trend line. The key is to find two points to connect on your graph. Once found, these values can be extrapolated to form a line of resistance and support, with the area in between defined as our trading range.

Below we can see an example of an active range on the EURJPY. Resistance has been formed by connecting two previous highs near 141.50. Likewise, support has been defined by connecting a series of lows near 140.60. The distance between these two points is a respective 90 pips which the range trader will look to take advantage of as long as support and resistance remain in place.

Learn Forex: EURJPY 30Min Trading Range



Planning an Entry

Once levels of support and resistance have been found, traders can begin planning to enter the market. One benefit of range trading is that traders can take a non-directional look at the market and place both buy and sell orders. Since price is moving sideways, orders to buy will be placed as close to our support line as possible. If price reaches resistance, the same stance can be taken but this time range traders will have a preference to sell the market.

Traders can set entry orders near support and resistance, or even trade with market orders. If you have limited time to trade, entry orders would be the preferred method of range trading. Entry orders will remain pending until price touches the designated level, prior to execution. Market order traders may use a system of confirmation before entering. Confirmation signals may include identifying a candle pattern or incorporating an oscillator signal prior to entering the market.

Learn Forex: EURJPY 30Min with Range Entries

Manage Risk

As with any trading plan, range traders need to consider risk. The major risks associated with trading ranges, comes from a potential breakout of support and resistance. In the event that support breaks, any buy positions should be vacated. As well, if resistance breaks, traders should consider the range invalidated and exit any sell orders. This process can be handled through the use of stop orders beneath levels of support or above key points of resistance.

---Written by Walker England, Trading Instructor


More...

With Forex Volatility So Low, How Might we Trade?

• US Dollar trades at potentially important resistance, Euro at key support
• Forex volatility prices trade near record-lows, setting up for slow moves ahead
• We’re focusing on range trading opportunities in all except the JPY pairs

The US Dollar continues to stick to tight ranges versus the Euro, Japanese Yen, and other counterparts. How might we trade if forex volatility continues to drop?

Watch the video above and updated automated strategy outlook below. What happens when volatility inevitably surges?

Definitions

Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near 90-day lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s 90-day range.

Range High – 90-day closing high.

Range Low – 90-day closing low.

Last – Current market price.

How are you calculating implied volatility? and how are you categorizing 'trend' and 'range' ie what are the factors based on?

Originally Posted by Trading2013

How are you calculating implied volatility? and how are you categorizing 'trend' and 'range' ie what are the factors based on?

It is related to their article on my previous post. As I understand - trend is "where price stands in relation to its 90 trading-day range".
About volatility ... I am not sure that I understand ... may be - they used Momentum indicator?

You can look at this thread about Market condition.

For example - I am using Ichimoku indicator to estimate market condition, or AbsoluteStrength indicator.

---

About AbsoluteStrength indicator :

bullish (Bull market) :



bearish (Bear market) :


ranging (choppy market - means: buy and sell on the same time) :



flat (sideways market - means: no buy and no sell) :


correction :


correction in a bear market (Bear Market Rally) :


=========

- AllAbsoluteStrength_v2.1 600+ indicator is on this post. This version works with Metatrader 4 build 600 and above.
- AllAbsoluteStrength_V2.1 600+ Signals_V1 indicator is on this post. This version works with Metatrader 4 build 600 and above.

18th June 2014 Monthly to 1 hr FX Majors AUDUSD Monthly to 1 hr Elliott Wave

Alternative Count wave 3 of Elliott Wave for the AUD/ USD from the Monthly to the 1hourly Chart. Covering wave counts, entries, with Stop loss, and realistic target level using Fibonacci and Elliott Wave Analysis.

Hi NewDigital,

Very interesting video. Can you please guide how to plot/how can I get this EW plotting with such a detailing?

Thanks
jag

Originally Posted by jagadish123

Hi NewDigital,

Very interesting video. Can you please guide how to plot/how can I get this EW plotting with such a detailing?

Thanks
jag

As I see - it is not Metatrader, and some lines were manually drawing.