In all markets buyers and sellers are fighting to find fair price. If price becomes oversold or overbought, the other side of the market will enter and tries to find fair price. Markets are either in Trend or Trading Range. Trend is one sided trading phase and trading range is 2 sided trading phase where both sellers and buyers are active. Trading Range phase will be started if both buyers and sellers thick the the current price is fair.
Trend is where that one side of market is stronger and can move price in its side. We have 2 kinds of trend:
1) Spike(Breakout) 2) Channel which is weaker phase in comparison to Spike.
In classic price action, market cycle is divided to 3 parts. I will explain each part with the signs.
1) Spike(Breakout) Phase:
It's also know as Imbalance. Strongest part of market cycle which one side of the market is very strong and breaks many supports/resistances. This phase will be ended after first actual pullback. Signs are: Consecutive Bars - Gaps between bars - No Pullbacks or Small Pullbacks - Not much overlap between bars
2) Channel Phase:
Another type of trend but weaker than Spike phase. Usually begins after first actual pullback. In the channels, the side that caused the spike is in control of the market. For example if we have bull spike, probability implies that we will have a bull channel after spike phase becomes finished. In both spike and channel phases only take with trend trades. I mean trade in direction of trend and not against it. Signs are: First Pullback - Deeper pullbacks - Higher Highs/Lows in bull - Lower highs/lows in bear / Overlaps between bars
3) Trading Range:
Finally market will find the fair price and that's why we have trading range phase. Every channel will finally be broken from opposite side. First Opposite Breakout of channel, is usually a sign of trading range. In trading range phase both side of the market are trading so you can both buy and sell in trading range. Buy low at bottom of range and sell high at top of range. Signs are: First Breakout of Channel - You see both buy and sell setups - Too many overlaps - Horizontal Movement
Some Examples:
1. EURUSD
2. BTCUSDT
3. XAUUSD
1) Spike(Breakout) 2) Channel which is weaker phase in comparison to Spike.
In classic price action, market cycle is divided to 3 parts. I will explain each part with the signs.
1) Spike(Breakout) Phase:
It's also know as Imbalance. Strongest part of market cycle which one side of the market is very strong and breaks many supports/resistances. This phase will be ended after first actual pullback. Signs are: Consecutive Bars - Gaps between bars - No Pullbacks or Small Pullbacks - Not much overlap between bars
2) Channel Phase:
Another type of trend but weaker than Spike phase. Usually begins after first actual pullback. In the channels, the side that caused the spike is in control of the market. For example if we have bull spike, probability implies that we will have a bull channel after spike phase becomes finished. In both spike and channel phases only take with trend trades. I mean trade in direction of trend and not against it. Signs are: First Pullback - Deeper pullbacks - Higher Highs/Lows in bull - Lower highs/lows in bear / Overlaps between bars
3) Trading Range:
Finally market will find the fair price and that's why we have trading range phase. Every channel will finally be broken from opposite side. First Opposite Breakout of channel, is usually a sign of trading range. In trading range phase both side of the market are trading so you can both buy and sell in trading range. Buy low at bottom of range and sell high at top of range. Signs are: First Breakout of Channel - You see both buy and sell setups - Too many overlaps - Horizontal Movement
Some Examples:
1. EURUSD