By knowing what market environment we are trading in, we can choose a trend-based strategy in a trending market or a range-bound strategy in a ranging market. The forex market provides many trending and ranging opportunities across different time frames wherein these strategies can be implemented. Knowing which strategies are appropriate will make it easier to figure out which indicators to pull out from your Forex toolbox. For instance, Fibs and trend lines are proper in trending markets, while pivot points, support, and resistance levels are helpful when the market is ranging. Before spotting those opportunities, you have to be able to determine the trading environment.
The state of the market can be classified into three scenarios: •Trending up