Markets Only Trade 2 Ways

While the phases of a market may be different across multiple time frames, markets can only trade in 2 specific phases in a single time frame which are mutually exclusive:

  • Consolidating – A sideways market or one with near parallel pivot points indicating buyers and sellers generally agree on the price or
  • Trending – A market can be trending up or down, but not both on the same time frame.  In this phase, price discovery is being challenged as demand exceeds supply or supply exceeds demand.

Consolidating Market – Sideways

Trending Market – Up Down

One of the first or even forced rule most traders learn is, don’t fight the tape.  In the words of one of the forefathers of economics:

“Markets can remain irrational longer than you can remain solvent.”

It is best to interpret and decipher what the market is communicating and act accordingly.  Therefore, as a general rule, since markets only have two dominant phases of activity – Consolidating or Trending:

  1. When the markets are trending (up or down), trade the trend and stay with the trend.
  2. When the markets are consolidating (sideways), buy the lows of the range and/or short the highs of the range.

The Commander Series has been specifically created to determine which phase the market is in and how to interpret these two dominant phases.

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