The sideways trend in technical analysis

The sideways trend in technical analysis

A flat, also called a neutral or sideways trend, is characterized by price movement within a specific range. To determine a given market condition, it is necessary to use some indicators.

Let’s take a closer look at what a flat is in Forex (it is no different from that in the cryptocurrency market). In simple words, it is a reflection of the stage in the price movement of cryptocurrencies. When the market is in a flat state, price fluctuations are insignificant for quite a long period of time due to the lack of certainty of the trend. A sideways trend in technical analysis can be opposed to an upward / downward trend. It is indicated by a lateral channel.

Sideways trend indication

The sideways movement of the trend on the technical analysis chart is evidenced by the maximum and minimum price values, which are consistently located at approximately the same level.

How to determine a sideways trend Flat on the price chart of a currency pair, as well as other trends, are displayed by support / resistance levels. They have a horizontal direction and are drawn through the minimum and maximum extremes, respectively.

How to trade with a side trend

A flat situation provides for a time period when the strengths of buyers and sellers are approximately the same and they are not enough for an upward or downward trend to form. For this reason, the price is not clearly stated.

Usually, trading on a sideways trend is carried out because the profit that the trader makes as a result of price changes is insignificant. In particular, this position is held by those traders who prefer the trend trading strategy. But still, some players who use the channel trading strategy prefer to trade in the flat.

Sideways strategies include:

Opening a buy trade near the support level;
Opening a sell trade near the resistance level.
It should be noted that a breakout of these levels may indicate the emergence of a new trend. In this regard, traders use the following pending orders for trading:

BuyStop — if the neutral trend resistance level is broken;
SellStop — when the support level is broken out of the side.

It is important to know that Stop Loss orders cannot be ignored, as a false breakout may occur, after which the price will return to the flat state.

Indicators used to determine lateral movement

The best sideways trend indicator in the Forex market is the oscillator. In particular, the values ​​of the oscillators must be between 0 and 100 and the center line.

Using the Moving Average Convergence / Divergence or Stochastic oscillator indicators, it is possible to determine the peaks and troughs of the neutral movement of the trend, as well as the marks at which it will end.

And yet, to determine the future direction of movement, you need to use indicators that are not calculated from the price, but have a direct impact on it. These indicators include indicators of cash flow, public mood, and others.

These indicators allow the trader to know for sure in which direction the trend is now, and not to engage in fortune-telling, as it happens when using technical indicators.

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