Student’s Question:What does a “sideways market” look like on a chart?Instructor’s Response:Take a look at the chart below for a visual…When the pair has been regularly trading between the same level of support and the same level of resistance for a period of time and not establishing new highs or lows, the market is said to be moving “sideways”.On the chart below, the Support and Resistance levels are clear and, as price oscillates between them, they are moving in a sideways fashion. Another term for this would be a Range and range trading is a widely used trading strategy.Simply stated, in a range a trader would buy the pair at support with a stop just below the support line and “ride” the trade up to resistance which is the top of the range. The long (buy) trade would then be closed and a short (sell) position with a stop just above resistance would be established when price action broke below resistance. Then that short trade would be in place until support was hit and then that position would be closed.
Tue Nov 09 19:58:00 GMT 2010