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Are We Dealing with Trend, Range or Breakout Type Markets?

Are We Dealing with Trend, Range or Breakout Type Markets?

2016-02-17 00:59:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

• There are three types of markets - trend, range and breakouts (though some consider the third transitional)

• Direction, volatility, fundamental event risk and themes can help determine what type of markets we have

• Broad correlations driven by risk trends makes for conditions prone to breakouts with trend potential

What are the Traits of Successful Traders? See what our studies have found to be the most common pitfalls of retail FX traders.

No set strategy will work in all market conditions. The so-called 'holy grail' of strategies is only theoretical yet many market participants feel they already have it or ignore the implications of applying their existing filter irrespective of prevailing market conditions. What type of market are we dealing with today? In general, there are three market types we find in the financial system: trend, range and breakout. While different assets can exhibit different circumstance, strong fundamental correlation nowadays found in broad 'risk trends' has led to similar conditions across the markets. With that in mind, we can use a few key measures to establish prevailing market conditions that can filter when to place our trades or what strategy to employ. We discuss both how to establish what kind of market we are facing and use the procedure to weigh current conditions in today's Strategy Video.

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