Forex Price Action Basics - Lesson 4: Ranging Markets

 

Previous lesson, Trending Markets...

 

In the previous lesson we covered the basics of trending markets - how price behaves when it is moving in a general upward or downward direction. This lesson will cover the basics of ranging markets - when price moves in a general sideways direction. 

 

 

What is a ranging market?

 

A ranging market is when the price action of a Forex pair is moving in a sideways direction. Unlike trending markets, which are a series of swing highs and swing lows, ranging markets are when currency price moves between 2 price areas of the market but in a general sideways direction.

What does price look like when it ranges?

 

When a Forex pair is ranging, price moves up and down between an upper and lower area of the market, but in a general sideways direction. Below is a 4 hour price chart of the AUD/USD, do you notice how price is moving in a general sideways direction? 

Do you also notice how price is moving between a clear upper and lower area of the market? Perhaps the next chart (below) will help, we have marked these areas for you...

 

These lower and upper areas of the Forex markets are called support and resistance.

 

Support is an area within the Forex market where price is evidently "held up" or gains support. Support is always under current price and supports price.

 

Resistance is an area in the market that evidently "pushes" price down or resists price. Resistance is always above current price and acts as a resistance or barrier to price. Perhaps the illustration and video below will make this clearer...

Resistance

Support

Watch this lesson in Video...

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