Understanding the environment of the overall market around you is the only true way that you can make the kind of progress you need to when you are attempting to trade the markets.

There are situations when the market is very choppy and not useful for traders who are attempting to make the most profitable trades possible. Then there are other times when things are trending smoothly and it is easy to understand what is happening.
It is so important to know which kind of environment you are currently in so you don’t make moves that are ill-timed.

Trend-Based or Range-Bound

One of the simplest differences that one can tell between the different types of markets that you may encounter is the difference between range-bound and trend-based markets.

Trend-based markets are markets where it is easier to get in on trades based on the specific trends that are present at any given time. People tend to trade these markets by getting in on whichever side of the trend they believe is moving most powerfully.

Range-bound trading strategies can also work for some traders, but they are sometimes more difficult to pull off for the simple fact that you never know exactly when a range-bound market may become a trending market.

 

In either case, it is essential to understand what kind of market that you are operating in so you don’t end up placing trades that don’t make sense given the market that you find yourself in.

You can use a number of powerful tools that are at your disposal such as trend lines, Fibonacci indicators, and other tools that can help you figure out where you are in terms of a trending market, a range-bound market, or some other conditions that you need to be aware of in the market.