Sideways Trading refers to a market condition where an asset’s price moves within a confined, horizontal range without exhibiting a clear directional trend over a specified period. This phase is characterized by a temporary equilibrium between buying and selling pressures, leading to price consolidation. It indicates market indecision or accumulation/distribution.
Mechanism
During sideways trading, price action is contained between identifiable support and resistance levels, where demand and supply roughly balance. Volume often diminishes, reflecting a lack of strong conviction from market participants. This period often precedes a significant price movement, as pressure builds within the constrained range.
Methodology
Traders in these markets typically employ range-bound strategies, buying near established support levels and selling near resistance, seeking small profits from price oscillations. They also vigilantly monitor for breakouts above resistance or below support, which signal the potential resumption of a directional trend and require adaptive strategy shifts.
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