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A Sideways Market

A Sideways Market

Richard Krivo, Trading Instructor

The other day in one of our LIVE Trading Webinars the question came up about what exactly is a “sideways market”.

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 above, the Support and Resistance levels are clear…the top of the rectangle is resistance and the bottom of rectangle is support. As price action oscillates between them, it is 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.

Note: Since this AUDNZD pair has broken out of the Range, this would indicate a bullish bias on the pair.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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