Some markets can be more volatile than others. Markets can evidence a range of patterns and can be volatile. Is there a distinction between markets which are more volatile versus markets which are more pattern bound. To explore this two market types will be considered, namely Forex and a volatile, sentiment driven market (B).
In Forex, patterns are seen repeating over and over again. Volatility comes and goes and can be seen in some sense as a pattern, but a pattern which can affect pattern formation, for example its clarity and stability. There is perhaps a certain stability in Forex, from the repetition and ebb and flow of patterns.
Consider this market (B) which is driven more by sentiment and evidences sharp volatility (there are a number of possible examples, but a generalised market is being considered). Here patterns can be seen, but the difference is that volatility is not a pattern existing alongside other charting patterns, it is what makes for movement in such a market.
So to compare these two market types, one can note that while they may seem similar in terms of charting action, in fact they can be very different in term of trading. This is because patterns in market (B) can exist with clarity and repetition but have a different expected outcome from those in the Forex market. Expected outcomes in general are not necessarily what happens, but rather can be seen as a pattern of expections emerging from the market.
The Forex market can be seen as having an overall stability, a stability which perhaps gives it structure from randomeness, the randomness itself a product of the myriad influences on the direction of value (i.e. the creating of chart patterns). At its most volatile, news trading, Forex can still be seen with structure creating expected outcomes, as has been explored in this blog, for example the respecting of resistance and support levels even in the immediate reaction to news.
So if this feature does not exist in the market (B) example, then pattern formation is not necessarily a clue to what might happen. But what is, well being in sync with the sentiment driving price movement and seeing patterns in its formation, fruition and disappearance, and initially its potential to exist (for example from growth factors), which can perhaps be found from fundamental analysis. A role for technical analysis can be seen as well, if this does indeed point to underlying structure evidenced in the chart, with the caveat that volatility can make technical patterns behave differently from usual expectations. Perhaps these can be seen as triggers for potential volatile moves, but pointing somewheer to the potential for growth.
