Module 1 — Market structure · Lesson 4 of 23 · 7 min
Trend, range and market phases
Recognising which phase you are in completely changes which kind of setup makes sense.
The market alternates phases
Price moves from expansion phases (fast directional moves) to consolidation (range) and retracement. Many mistakes come from applying a trend setup in a range, or a range setup in a trend.
How to recognise a range
- Price bounces several times between two levels without a clean break
- Candles have long wicks and small bodies
- Volatility (ATR) is falling compared with previous weeks
Expansion, retracement, continuation
A typical cycle: strong expansion, retracement of part of the move, then continuation or reversal. ICT/SMC approaches try to identify the retracement in which to enter with the previous move.
When not to trade
Deciding to do nothing is a trade in its own right. If structure is confusing, context is unclear, or a major announcement is coming up in the economic calendar, staying out protects your capital.
Exercise
- Classify the last 60 days of a pair as trend days, range days and retracement days
- Compare the classification with the average size of moves (in pips) of each day type
- Note how many 'textbook' setups there would have been in each phase
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Educational content, not financial advice. Trading involves risk. ICT is a term referring to the materials of Michael Huddleston: this course is independent and not affiliated.