There is a big difference between trading in an up trending market, a down trending market, and a range bound market. Money can be made in different kinds of markets but you have to be trading the right way to capture those profits.

Here are the ten best signs that a market is range bound:

  1. The major market indexes have long term defined resistance and support levels.
  2. You have many growth stocks having trouble getting through their resistance levels.
  3. You can safely buy support that bounce off key short term moving averages or support levels.
  4. Traders and investors are surprised that the market is not breaking out in either direction.
  5. Bad news hits the market but the market holds key support levels because it is already priced in.
  6. You can not identify any clear trends between risk on and risk on assets.
  7. Market leading stocks are trading inside strong price bases
  8. Stock traders are waiting for key momentum break out signals.
  9. Fear of missing out on the next rally replaces the fear of losing money on sudden drops. There is a lot of holding and waiting for a the up trend to resume.
  10. The majority of traders do not believe the range will last and are waiting to trade the breakout in which ever direction it happens.
  11. Short term moving averages have gone flat.
  12. Buying momentum and selling weakness short is a money losing strategy.
Range bound Market
Chart courtesy of StockCharts.com