Ranging markets are characterized by repeated highs and lows. They occur when an instrument’s values move sideways rather than top to bottom. There are several tools for spotting such conditions, and the ADX is one of them. While readings over 30 reflect up-and-down swings, those at 25 and below show horizontal shifts. Note that diminishing ADX values translate to weaker trends.
You can also use the RSI, a technical indicator measuring the strength of vertical movements. In most cases, speculators consider readings beyond 70 as bullish and those beyond 30 bearish. On the other hand, a 40-60 RSI hints at a ranging market.
This goes hand in hand with the ATR that presents the average difference of the latest candlestick’s highs and lows. An ATR with its MA below 20 periods separates ranges from bull and bear runs. Bollinger bands are equally useful thanks to their swift response to volatility. In general, narrow horizontal bands signify ranging environments.