How To Identify A Range/Trending Market - Market & Volume Profiling | Axia Futures

Summary

This video discusses strategies for trading range-bound and trending markets, with a focus on identifying early signs to determine which market type you're dealing with. The speaker highlights key indicators for both trends and ranges, including volume behavior and price movements during the initial balance. Key concepts like volatility versus trend, liquidation moves, and the importance of considering the bigger picture are also covered. The video emphasizes the need to recognize whether a market is likely to trend or stay within a range to apply the right trading strategies effectively.

Takeaways

• 😀 Ranging markets and trending markets require different strategies—trend-following for trends and reversion strategies for ranges.
• 😀 Identifying whether the market is trending or range-bound early in the day is crucial for selecting the appropriate strategy.
• 😀 Volatility can increase range sizes but does not necessarily indicate a trending market. A volatile market can still be range-bound.
• 😀 In trending markets, small initial balances followed by single prints and absorption are key indicators of continued trend movement.
• 😀 In range-bound markets, a wider initial balance is common, and breakouts typically fail to maintain direction, leading to a back-and-forth movement.
• 😀 Two-way action (as much buying as selling) is a hallmark of a range-bound market, while trending markets are dominated by one directional force.
• 😀 A larger picture view of the market, including volatility and historical price levels, is essential in understanding the potential for trend or range continuation.
• 😀 Trend identification is possible by observing price movement out of initial balances followed by absorption, signaling stronger conviction to continue in one direction.
• 😀 Predicting a range-bound market becomes easier when the market opens in the middle of a volume profile, suggesting balanced support and resistance levels.
• 😀 Liquidation moves are different from trend moves. Liquidation moves are typically faster and more panic-driven but do not continue in the same direction like trends.
• 😀 Markets can feel trending during periods of high volatility but may still be range-bound, so it’s important to adjust expectations based on actual price movement and not just volatility indicators.

Q & A

What is the main focus of the speaker in this video?

The speaker focuses on explaining how to identify whether a market is trending or range-bound and the appropriate strategies to use for each type of market.

How does the speaker distinguish between a trending market and a range-bound market?

In a trending market, the movement is directional, driven by one dominant buyer or seller, leading to consistent single prints and smaller distributions. In a range-bound market, there is no clear direction, with equal buying and selling pressure, and the market oscillates within a defined range.

What is the significance of the initial balance in both trending and range-bound markets?

The initial balance, which is the first hour or period of trade, plays a key role in distinguishing between the two types of markets. A smaller initial balance followed by directional movement suggests a trending day, while a larger initial balance with reversals indicates a range-bound market.

What role does volume play in identifying trending or range-bound markets?

Volume plays a crucial role in identifying market conditions. In trending markets, volume picks up after the initial balance, pushing the market in one direction. In range-bound markets, volume tends to be more balanced, with no strong commitment to pushing prices outside of the initial balance.

How can you predict a range-bound market?

A range-bound market can often be predicted by observing the market's opening in the middle of a high-volume area. If the market fails to break through the initial balance highs or lows, it is likely to remain within a range for the rest of the day.

What is the difference between a trend move and a liquidation move?

A trend move is characterized by steady, directional movements with increasing volume, often driven by buying or selling pressure. A liquidation move, on the other hand, involves a rapid exit of positions, typically causing sharp, volatile movements but not sustained trends.

How can volatility influence the perception of a market as trending or range-bound?

High volatility can make a range-bound market feel like it's trending, as the market will exhibit large price swings within the range. However, despite these movements, the market remains confined to a certain price range, rather than following a clear direction.

What is the importance of the bigger picture when assessing market conditions?

Understanding the bigger picture is important because it helps to determine whether a trend is likely to continue. For instance, in markets like gold, a move above significant resistance levels could signal the potential for a larger trend, influencing trading decisions.

How does the speaker suggest handling trending days versus range-bound days in terms of trading strategies?

On trending days, the speaker advises playing the trend by entering trades in the direction of the trend, using passive strategies to enter at favorable points. On range-bound days, traders should look for opportunities to trade within the established range, buying at support levels and selling at resistance levels.

Why is it important to differentiate between a trending market and a liquidation event?

It is important to differentiate because liquidation moves can create temporary volatility that mimics a trend but do not sustain. Misinterpreting a liquidation move as a trend could lead to losses, as the market is likely to revert after the liquidation is over.