4 Effective Ways of Trading Forex When Market Consolidation
The market is being consolidated or ranging is a market that is often avoided forex traders. In fact, there are ways to reap the benefits when the market is consolidating.
The market is being consolidated or ranging is a market that is often avoided forex traders. In these non-moving market conditions, traders tend to stop trading and re-start if the trend has reappeared. However, although the best tips are the wait, there are some effective ways to reap the benefits of the gap while the market is consolidating. Here are some effective ways of trading on the consolidated market.
1. Recognizing Consolidation and Continuity
One of the most common traders’ mistakes is to look for trends in every chart. To the extent that they often do not realize that the trend is gone because the market is consolidating or being sideways. In the previous article, we have discussed how to recognize the characteristics of a consolidating market.
In addition, a trader also needs to know the consolidation and continuity in price action. Because after the consolidation ends, the price will breakout and the moment is very strategic to re-trading. Consolidation usually occurs after a large upward movement or after a large decline. For example, the price will likely move up, after which it will enter the consolidation period and move sideways.
After a period of consolidation and sideways, there will be a period called continuity. As it stands, continuity is continuing, ie when the price breaks out after the sideways consolidation period and continues in the same direction where prices are traded before entering the consolidation period. The description of the consolidation pattern to continuity is as follows:
In fact, this period of continuity can also be one of the best times to get back into the market, because prices can form good moves, rather than we trade in sideways markets.
This pattern can be repeated several times in all time frames. If we realize it, we can, you know, get a big advantage because of it. Price movement in continuity phase will be stronger and more free.
2. Waiting for Best Breakout Price In The Choppy Market
Sometimes the market can also become very choppy and move in the sideways range of “messy”. Such market conditions are highly risky. Inexperienced traders will often get caught in low trading probabilities, as prices are traded in the same spot and only move up and down and irregularly without any ground.
This type of market is closely related to the price movement that is being consolidated. In some cases, when prices move into the consolidation phase, the upside and down movement will end very tightly without any loopholes for trading.
The best option for such a condition is not to force for trading. Let the market do as they like until break up or down. Once the break is formed, traders can trade with breaks and new momentum.
The chart below is a “super choppy” market. The best way is to let the market form a clear break, then we open the position. Why? because at times like this, price movements are more understandable.
3. Using Triangle Trading Patterns
What is trading triangle pattern? However, in summary, the triangle pattern is a horizontal trading pattern whose trading range then narrows as the market moves sideways. Examples are like the following AUD / USD trading:
First we first determine support and resistance by connecting the highest and lowest graphs that occur in the previous graph. Then, we can apply a passive trading triangle by waiting for the AUD / USD pair to breakout from the current resistance support area. In this way, the trader can put a sell at the support and buy levels at the resistance level.
4. Trading At The Greater Time Frame
Trends appear to be more noticeable in larger time frames, as consolidation often occurs only in relatively short periods. Therefore, trading in larger time frames, such as daily time frames, can prevent us from consolidating prices.