Like the sea turns from calm to stormy, so too do the markets.
As a trader, like the captain of a sailing ship, you want to notice these changes so that you can adapt your strategy as appropriate.
In this previous post on market types, I talked about how you identify the market type you are in, and how to use it to trade what is in front of you.
Today, I wanted to share which market types typically follow the one you are currently in. Trading is very much about probabilities, and so if you know which market types will likely follow next, it can give you a big edge.
For example: if the market type is bull volatile, you can expect the next market type to be bear volatile, and tighten your stop-loss so you don’t give back your profits when the sudden sell off begins.
Here are the primary market types and the market types that generally follow next.
- Bull normal. Followed by a bull volatile or sideways quiet.
- Bull volatile. Followed by a sideways volatile or a bear volatile
- Bear normal. Followed by a bear volatile or a sideways quiet
- Bear volatile. Followed by a bull volatile of a sideways volatile
- Sideways quiet. Followed by a bull or bear normal, or a sideways volatile
- Sideways volatile. Followed by a bull or bear normal or a sideways quiet.
So if you are in a bull normal market, you can expect a bull volatile to happen next, or if you are in a sideways quiet you can start to stalk the break-out to a new trend.
There is a lesson on market types in the Advanced Forex Course for Smart Traders.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (https://fxrenew.com/forex-course/). He is a key team member at premium FX services provider www.fxww.com and part owner of Forex Signal Provider www.fxrenew.com (You can get a free trial). If you like Sam’s writing you can subscribe to his newsletter for free (https://fxrenew.com/newsletter-sign-up).
This post was first published here.