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RANGE MARKET (CONSOLIDATION)
Forex market is in a range (consolidation) mode about 60% of the time so it is important to have a strategy that deals with this situation.
Here are the indicators that are needed for this setup:
1. Moving Averages
Exponential Moving Average: 5 (red color)
Exponential Moving Average: 20 (pink color)
Exponential Moving Average: 40 (purple color)
Exponential Moving Average: 100 (dark blue color)
2. MACD with the following settings (20,50,6)
3. Stochastics (9,3,3)
4. Support and resitance indicator (the purple and yellow dots, or lines will have to be drawn manually each time a top or bottom is established)
5. Pivot Point indicator (or lines can be drawn according to the calculations provided in the Pivot Point lesson)
Condition to enter a buy trade:
Moving Average lines have to be flat
MACD has to be flat
Stoch lines have to be in the 20 zone and starting to "go up"
Condition to enter a sell trade:
Moving Average lines have to be flat
MACD has to be flat
Stoch lines have to be in the 80 zone and starting to "go down"
Target & Stop:
We will need to use our Support & Resistance indicator to give us some basic idea of the closest levels where price is likely to stop
Most of the time it will be the size of the range. Some pairs like EUR/USD may have a 30 pip range or smaller, others may have a 50 pip range or higher...
Stop, We will be using the high and low from the range. Stops will be above the high of the range, and below the low of the range.
Sometimes price will be dancing between our pivot points so we will need to consider these lines as our support & resistance.
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