One of the biggest rules every trader should know may be the longer markets trends and exhibits one of many ways momentum the higher the odds which a range bound period is getting close to. Conversely, the longer the market is actually trend less or range bound the higher the odds that strong directional traction is approaching. There are exceptions to this rule but typically, when the thing is that a long trend that lasts for a few months you almost always go to the trend less consolidation period immediately following the end of the trending routine. Similarly, when markets are range bound for extended periods of time a strong breakout accompanied by means of volatility and momentum typically practices this pattern.
In this example you can see how this pattern applies to intra-day price fluctuations also. You always have to take into account that markets are driven by sensations. This will help you gain better perspective of how marketplaces really work and what's really behind each move. Also take into account that there is some correlation between the amount of time of each stage and this stage. In other words if range bound stage lasted 2 months chances are the trending momentum stage or cycle will last a couple of months as well.
Since markets are driven by people the ones are emotionally driven this pattern will apply across stocks, futures, commodities, currencies and most other traded in financial markets. Moreover, this pattern of alternating involving range bound and momentum will apply to different time frames also. Notice in this example how Hyatt Hotel stock alternates involving range bound and trending intervals, once you start paying focus on this alternation pattern you will start taking it into consideration whenever planning your entry and quit strategies.
Once you discover alternative trading cycles you will begin to look and analyze markets somewhat differently. Not only will you look closely at what the market is currently doing you will probably start looking at the earlier few cycles to gain clues to assist you determine how long the current cycle can last. For example, the U. S. Stock Market is just entered what seems to be range bound market conditions after trending for a few months. You can see by taking a look at this chart that the currency market was previously trending strongly since September of not too long ago. It appears that sometimes in the first week of April in this year, the Stock Market moved into a trading range cycle. Because previous cycle lasted several weeks, it would be reasonable to assume that this stage will last several months also. Keep in mind that this analysis is completed based on probabilities and not certainty so nobody knows for sure what one's destiny holds. However historically alternative cycle analysis spent some time working for over 100 years now as well as the odds are it will work in the future just as well.
When you see that markets are changing from one cycle to another location you should seriously reconsider how you trade that market and the kind of strategies that are working with the current economic cycle; once the cycle changes the techniques that have been used effectively and once that worked in the last cycle will not work with the current economic cycle. Therefore you must adjust your trading style and learn to trade both trending and array bound trading cycles.
There are many clues the markets provide that will alert us to changes with market cycles. For example, if your stock market changes from trending to help range bound cycle, both quantity and volatility decrease. When marketplaces are beginning the trending routine, the lows of the day usually occur from the mornings and the highs from the day typically occur towards the particular closing bell.