The Patterns: Trending versus Bracketed Markets

As discussed earlier, different TF has different opinion of market. Because of this difference of opinions; the composite market activity which depicts the sum of the all opinions, may have either balanced or imbalanced view on the markets direction. Hence, market always goes from balance to imbalance (i.e., excess), then comes back to balance. According to JD, a trend, put simply, is a divergence of price away from value. In a trend, price keeps moving in a given direction on consecutive sessions, thus value too following it, suggesting trade facilitation in that direction. Trends can be either healthy or emotional; i.e., a healthy trend must show both strong volume & healthy structure; however emotional trends have poor volume &/or poor structure.

In bracketing or bracketed market, (conventionally, called consolidation) the price auctions back and forth between two price levels that serve as a margins of trading range. New trend may emerge out of bracket, which is conventionally known as breakout (BO).

Trending markets are easy to trade, & it is the bracketing markets which requires both knowledge & experience. The key to capitalizing on a trend lies in the trader’s ability to determine if the trend is continuing or not. Key to trade brackets is to be able to analyze what happens to the market direction at the margins of bracket- whether it will lead to BO & continue into new trend or show failed BO & returns into the bracket. Many nuances are involved in this kind of analysis which requires good experience of continuous analysis of market using chart profiles.

Any bracketed market or trading range can also be called as Balance Area (BA); even an inside bar or two overlapping consecutive Periods, or overlapping 2 or more days of market activity is considered as BA. To be able to analyze what happens within this BA & around the margins of it; whether BO will occur & sustain or not; it is a great skill required for an intraday or ST trading. Thus BA breakout (BABO) is very crucial concept in trading; and JD says that BA are the hotspots for ST traders. Those looking for short term or intraday trading, must be able to identify BA & use them for trading, without losing the sight of bigger picture i.e., ITM or LT- trend or bracket. Thus, monitoring every price movement with respect to the bigger picture becomes key skill for a RWT; and JD have given great importance to value over price when it comes to monitoring any auction.