In the most general sense, markets move in a series of expansions and contractions. This is also referred to as periods of trending markets and range-bound markets.

Trending markets, or market expansions, are periods when the price moves in the same direction for a sustained period of time. Learn more about identifying a trend here.

Ranges, or contractions, occur when the price stays in the same general location, or bounces back and forth between two consistent levels.

Example of a trending market transitioning to a range-bound market:

It’s important to note that expansions and contractions happen at all time frames and can be mixed in with each other. Each market condition is not inherently good or bad, each serves its purpose and can be useful when understood.