We will see one of the most important parts in trading and is to differentiate the

types of markets that can occur every day, remember that the market does not have
clean movements or behave always of the same form, its structure constantly
changes. It is very important to know in what type of market we are moving
because according to the type of market we develop inputs of greater probability:
any market is operable.

• Do not confuse market type with the direction of this, they are different concepts.

• In a session several different market types can be presented, so we must always

adapt to what the market offers us.

• Remember that the movements of the market are not always clean, then the
structures of the types of markets will not always look the same. We will pay
attention to its general characteristics to act on what the market offers us.

• Understanding market types will help us adapt to price movements and define
opportunities more likely.

Before seeing the market types one by one, we will familiarize ourselves with the
Media Band or MidLine to have a reference and be able to more easily identify the
existing market types.
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Later we will see what is its operation and usefulness, for now we will have it as a
reference.

Market types
• Chopped markets.
• Erratic markets.
• Channel markets.
• Oscillating markets.
• Directional markets.
• Trend markets.
• SOM markets.

Chopped markets
Sometimes we will not identify a clear structure and we will see the market as
"ugly". The chopped markets are characterized because they do not have a clear
direction.
This type of market does not occur on many occasions, but we must be careful
because it is difficult to find patterns and objective places to participate, since
being movements without defined structure the probability of the trades decreases.
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Erratic markets

The erratic markets are similar to the choppy markets, but they have
direction.

• In general, the runs and setbacks do not respect the MidLine or Media Band
(they cross it easily).

• Pivots come to trend lines that price uses as support or resistance.

• One direction is noted thanks to the trend lines, however, the market sense is
not so strong.

• There is no clear structure regarding the runs and setbacks.

Erratic markets are a type of market where there are possibilities to

participate, you can define objective places and high probability of operation
and management of the trade as the lines of trends that serve as support or
resistance.

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!

Channel markets

As the name implies, they are markets where the price is bouncing between
support and resistance areas that function as a channel. However, this type of
market has the characteristic that there is not much space between the areas,
there is little movement and the price when it reaches a resistance revotates
and goes to the support or when it reaches the support it revotates and goes to
the resistance. Another characteristic, besides the small range between the
areas, is that there is no respect for the MB.

In these markets channels trades are of low probability because there is no

room to wait for a good target. However, the price at any time breaks the area
and usually continues with more continuation in favor of the break.

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Channel markets teach us to identify another market position, because sometimes

not participating is more profitable. It is better to wait for the price to leave the
channel and show us better opportunities

Oscillating markets

In the oscillating markets, like the channel market, the price moves between two
areas, however, there is a greater range of movement because there is a good
separation between the areas of support and resistance.

When there is good distance between the areas, you can identify patterns, structure
and good movements within the channel.
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Directional markets

Directional markets have a very clear structure, as there is a defined support

or resistance area and a trend line that approaches the support or resistance
area more and more. It has a flat side and a trend line.
• It has a triangle shape.

• There is a high probability that the price will break the flat side.

!
The directional market revotes from an area of support or resistance to a trend line
that functions as a support or resistance area. This type of markets offers us several
opportunities to participate in favor of the general direction of the market of the
market.

!
Tendency markets

Trend markets are those that have a definite direction (whether bullish or
bearish). The runs are decisive and the setbacks come to the Midline and
usually the pivots that are generated are maximum and minimum major (in
uptrend) or minimum and maximum minimum (in downtrend).

!
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Trend markets offer opportunities in favor of the trend.

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SOM Markets

The key to identifying SOM markets is that they have a very strong trend.

The runs are so strong that the setbacks do not reach the Midline.
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• Extended runs and weak setbacks.

• It is not a market that presents itself very much, but when it does it offers many
opportunities of high probability in favor of the trend.

EXERCISES:

Chopped markets

• Identify 3 chopped markets.

Erratic markets

• Identify 3 erratic markets.

Channel markets

• Identify 3 channel markets.

Oscillating markets

• Identify 3 oscillating markets.

Directional markets

• Identify 3 directional markets.

Tendency markets

• Identify 3 trend markets.

SOM Markets

• Identify 3 SOM markets.