We have three types of Broad Market Structures.
1 - Breakout 2 - Channels 3- Trading Range
1 - Breakout
Every Trend starts with a Breakout. Every Trend ends with a Failed Breakout. Breakout is the Strongest type of Trend.
2 - Channels
Trend is contained in a Channel. Pullback in channels categorises it in the Tight or Broad Channel. Channel is the Weakest Trend. Small Pullback Channel is a Tight Channel Only Look to buy in it. Deep Pullbacks are Broad Channels. 2 sided trading is possible in Broad Channel. Breaout from Trend always evolves in Trading Range. Some Channels such as or Triangles evolves into Trend Reversal.
3 - Trading Range
Market is not trending. Bulls and Bear both are making money in this structure. They scalp not swing. Chances of Breakout are 50-50 in either direction. 80% of the breakouts will fail in Trading Range.
Buy Low and Sell High Should be followed.
Trend begins with a Breakout. Breakout weakens into Channel. Channel evolves into Trading Range. Now, Market decides which way to go. Probability of Trend Resumption and Reversal is same.
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