Tactics to Distinguish a Trending Market From a Sideways Market

of the most important things we have to do as price action traders, is determine whether a market is trending or not. The answer to this will determine which approach you take to a particular market, so it’s critical that you understand how to properly differentiate a trending market from one that is sideways. If you’ve been struggling with this recently, or you are new to trading, this lesson is for you. After reading it you should feel that you have a much clearer understanding of exactly how to distinguish a trending chart from a non-trending chart. Look for trending price action patterns This first tactic ( How to build a Forex commercialism arrange  )  has been around for literally hundreds of years and for a very good reason; it works. My favourite way to determine if a market is trending or not, is to simply look at the price action of that market. Very simply, I look for a repeating pattern of Higher Highs (HH) and Higher Lows (HL) in an up-trending market and Lower Highs (LH) and Lower Lows (LL) in a down-trending market. Here is an example of a market that was obviously trending lower as evidenced by the repeating pattern of Lower Highs and Lower Lows Lower high and lower low chart

 higher high and lower high chrat trending2-11

 Tip – I often get emails asking me how I know when a new trend has begun or an old one has ended. Well, you use this same tactic of looking for price action patterns of HH HL or LH LL. For example, once you see a pattern of HH and HL has been interrupted or broken, by price making a Lower High, it’s an early-warning that the uptrend may be coming to an end. To truly consider that the up-trend has ended and a new down-trend has begun however, we need to see at least one pattern of LH and LL following the uptrend ( Trade with Parabolic SAR  ) . That means, once price makes the first Lower High (so it fails to make a Higher High), we would then need to see it make a Lower Low following that Lower High, at this point, we can start looking to be sellers. Look for parallel levels We can also use key levels of support and resistance to determine if a market is trending or not. The basic approach is to simply look for price that is clearly oscillating between parallel levels. If it is bouncing between two parallel levels, then you have a range-bound or sideways market, not a trending market.
There are two basic types of sideways markets; a ‘choppy’ one and a range-bound one, for more on this, check out my recent lesson on how to trade a sideways market. In the example below, we can see that price was generally moving sideways between parallel levels of support and resistance. Notice that price won’t always hit these levels ‘exactly’, but if the general movement is sideways between two obvious levels, you have a non-trending, range-bound market.