Financial Blog: When is a trend not a trend?

When it’s a range. A trading range or a range-bound market is a market that remains confined within a relatively narrow range of prices. In currency pairs, a short-term (over the next few hours) trading range may be 20 to 50 pips wide, while a longer-term (over the next few days to weeks) range can be 200 to 400 pips wide.

For all the hype that trends get in various market literature, the reality is that most markets trend no more than a third of the time. The rest of the time they’re bouncing around in ranges, consolidating, and trading sideways.

Although medium-term traders are normally looking to capture larger relative price movements — say, 50 to 100 pips or more — they’re also quick to take smaller profits on the basis of short-term price behavior. For instance, if a break of a technical resistance level suggests a targeted price move of 80 pips higher to the next resistance level, the medium-term trader is going to be more than happy capturing 70 percent to 80 percent of the expected price move. They’re not going to hold on to the position looking for the exact price target to be hit.

Trends

When is a trend not a trend?

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