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March 19, 2018

Question:What do "Ranging" and "Breakouts" mean in financial terms?

Answer:

Ranging

Ranging occurs when the market price stays at around the same level with very little change.

In the situation, the support and resistance level* are very close to one another.

*The support level is the lowest price that market has reached. When a trough is repeated several times, a straight line can be drawn between the troughs. This line that represents “support line”. The “resistance line” is the opposite. The line that passes between the peaks, reached by the market.

Breakouts

A Breakout occurs when a ranging markets suddenly erupts into a dramatic rise or fall*.

Which breaks through the previous support and resistance level.

Entering into a trade at the breakout point would usually results in high Returns.

Rise and Fall

The market is forever moving in waves.

What goes up must come down and what goes down will eventually rise back back.

Rises or falls are never absolute as there’s always a correction, meaning that at the height of the trend the trend corrects itself and tries to return to its previous value, and then the price continues in the direction of the trend.

The correction create a kind of waves within a wave, as you can see in the diagram.

We marked the reversal points in the waves with letters ABCD.

These markings will serve as the basis for the various market analysis they will be performed.

It is therefore very important to learn how to recognize them.

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