Is the market trading or trending?

Use the following rules to determine if a market is range trading or trending

Range

  • ADX Less Than 20 – The trend is weak when the Average Directional Index is less than 20
  • Narrow Bollinger Bands – Suggests the ranges are small and there is low volatility in the markets
  • Risk Reversals – Risk reversals will switch between favoring calls and puts at zero in ranging markets
    Trend

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