How to quantify and identify (real-time) a trading range [Video]
|Identifying ranging and trending markets
The challenge for traders and technicians is to define and distinguish between a ranging market and a trending market.
This section explores the difficulty of defining these market conditions in a rules-based quantitative way.
Defining ranging and trending markets
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Traders face the challenge of defining or identifying ranging and trending markets.
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The goal is to define these market conditions in a rules-based quantitative manner.
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Real-time identification of these market conditions is crucial.
Using corn futures chart as an example
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The highlighted yellow area on the chart represents a trading range in corn futures.
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Visually identifying this range is relatively easy with hindsight, but real-time identification is more challenging.
Utilizing the MACD-V indicator
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The MACD-V indicator can be used to identify ranging markets.
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One of the 7 Core Ranges within the MACD-V indicator is specifically designed for this purpose.
Rule for identifying ranging markets with MACD-V
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According to the rule, when the MACD-V indicator stays between -50 and 50 for more than 25 bars, it indicates a ranging market.
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The MACD-V indicator oscillates around zero when there is no significant upside or downside momentum in the market.
Real-time application of ranging market definition
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Point A represents where the MACD-V indicator crossed above -50, indicating an upward trend.
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Point B represents where the 25-bar rule was satisfied, confirming a ranging market condition.
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From point B onwards until the end of the highlighted area, we can consider it as a real-time definition of being in a trading range.
Importance of using tools like MACD-V
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The MACD-V indicator provides valuable insights into identifying ranging markets.
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It helps traders make informed decisions based on real-time data analysis.
Conclusion
The MACD-V indicator and its specific range rules can be used to define and identify ranging markets.
This section emphasizes the importance of using such tools for real-time market analysis.
Utilizing MACD-V for ranging market analysis
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The MACD-V indicator's range rules are effective in identifying ranging markets.
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Traders can use this information to make informed trading decisions.
Benefits of real-time definition
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Real-time identification of ranging markets allows traders to adapt their strategies accordingly.
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It provides a quantitative approach to understanding market conditions.
Final thoughts
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Understanding the difference between ranging and trending markets is crucial for traders and technicians.
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Utilizing tools like the MACD-V indicator helps in defining these market conditions accurately on a real-time basis.
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