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    Price action trading in sideways market

    Hi traders! Value trader is back.

    In this artice I will share with you some robust principles for trading inside a rotational market - I use them on a regular basis in my own trading. There’s nothing new about the fact that around 70% of entire trading activity occurs within a trading range (it concern currency market, of course - for commodities and stocks distribution is pretty different). Well, it doesn’t mean that the only way to obtain 80% of winning trades is to fade the price action. But it means that to trade successfully in rotational market, trader has to know the mechanics of rotational market.

    How one can identify trading range? Some traders do very simple thing - they connect extremes between each other and make conclusion that they know where ”border” of a trading range is.

    Attachment 12288

    But this way can be misleading - how do you know that any taken extreme is important and will not be renewed? According to my experience, it’s much easier to identify rotational center than border of the trading range.


    Rotational center:

    The best way to describe rotational center is to think of a simple moving average. Price gets back ro average, then moves away from it. Volatilty of swings to both directions tends to be similar:

    Attachment 12289

    But moving average may not be very accurate in real trading, because it performs well only in slow market with low volatility. In other circumstances it will lean to price, leaving trader confused about location of rotational center.

    In my trading, I use several clues, that help me know that I identify rotational center correctly. They are: “Emply candlesticks”, “Low volatility areas”, “Rail formations” and simple price probes. (I use M30 chart in my analysis, you should adapt principles shown below to your timeframe).


    Empty candlesticks:

    If I see candlestick with very elongated candlestick, I expect rotational center to occur somewhere within the body of that candlestick.

    Attachment 12290


    Rail formations:

    The same thing is with rail formations. If I see 2 candlesticks located close to each other, I expect rotational center to be located within this formation.

    Attachment 12292


    Low volatility areas:

    And the most important clue is area with extremely low volatility. On my preferred timeframe (M30) it is represented with sequence of several “doji” candlesticks (having very small bodies):

    Attachment 12291


    When I combine all clues together, I can get the idea of rotational center. And in many cases, it is not overlapping with moving average, that is, lagging indicator by its nature:





    P.S. I will keep this thread closed to comments, until description will be completed (to avoid questions, that are going to be covered later).

    to be continued...

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    Last edited by Value trader; 03-02-2015 at 07:02 PM.

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    Registered user Quid's Avatar
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    Quote Originally Posted by forexlearner View Post
    Yes right stop loss is very good tool which can save us to handle the side ways market condition well. I am a swing trader so many time I got this type of problem and it give me a lot of pain too, But since I am using less risk and proper strict stop loss in my trading getting a good trading performance. I think risk management play an very important role in our trading
    Trading with sideway market is profitable for traders because they are trading with the low liquidity and the price action when sideway market appears are very good.They can trade too with the good trading pattern and the good trading strategy with price action.They need to know the risk and the management which is good can make the trades more profitable.It is good to trade in sideway market if they can make the good trading following the pattern in sideway market.

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    Registered user lawners1791's Avatar
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    the work on qualifying figures of candlestick formation those leaves of chance as trader might wants to gains of more with the confirmation to refer ones with the decision on requesting of order to work with the creation of new position.
    as the pattern those had with the customs on notice with the records of returns with the past work on showing trend direction movesment of the projected options.

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    Quote Originally Posted by Quid View Post
    Trading with sideway market is profitable for traders because they are trading with the low liquidity and the price action when sideway market appears are very good.They can trade too with the good trading pattern and the good trading strategy with price action.They need to know the risk and the management which is good can make the trades more profitable.It is good to trade in sideway market if they can make the good trading following the pattern in sideway market.
    I think it's depending on the method of trading itself, if you're trading with scalping strategy so it will be good for trading in sideways condition because scalping need to make good decision in short time and if you're trading in sideways condition so the risk will be lower than you're trading in trending condition. But still, it's depending on your money management and risk management to determine the risk in each transaction.

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    Quote Originally Posted by andry777 View Post
    I think it's depending on the method of trading itself, if you're trading with scalping strategy so it will be good for trading in sideways condition because scalping need to make good decision in short time and if you're trading in sideways condition so the risk will be lower than you're trading in trending condition. But still, it's depending on your money management and risk management to determine the risk in each transaction.
    You are very correct sir, scalping is the only solution in the condition of sideways market trading. There is no good use for the trader to stay longer than necessary in such a condition in the market, because the trader can not tell whether the sideways would continue or the direction the market would breakout to finally. So, quick entering and exiting would help, and the trader can not rely on management on the sideways for long, because it is a dangerous game.

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    Registered user lawners1791's Avatar
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    waiting of the points on entering by the rotational center as those had with the chance on trader to spends of the deeper on attention with the arrange on running of different system on helping with the use to captures of future trend direction as with the confirmation on appearance of signals to gives of conclusion to begin of the preparation of the order creation by the market.

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    Quote Originally Posted by Quid View Post
    Trading with sideway market is profitable for traders because they are trading with the low liquidity and the price action when sideway market appears are very good.They can trade too with the good trading pattern and the good trading strategy with price action.They need to know the risk and the management which is good can make the trades more profitable.It is good to trade in sideway market if they can make the good trading following the pattern in sideway market.
    Well, if I would advice in my own professional experience, I would rather say that traders should even leave the sideway market, it is not a safe way for any trader to trade. I have seen many traders lost money because of this, and there is no amount of trading system that would trade it well, this is because the market should at least have a definitive direction before trading it. However, if you are a good scalper, you might still outsmart the market in this channel trading.

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    Quote Originally Posted by cozard007 View Post
    Well, if I would advice in my own professional experience, I would rather say that traders should even leave the sideway market, it is not a safe way for any trader to trade. I have seen many traders lost money because of this, and there is no amount of trading system that would trade it well, this is because the market should at least have a definitive direction before trading it. However, if you are a good scalper, you might still outsmart the market in this channel trading.
    I am not agree with you because technical analysis is a good way to analyze the side ways market but if you are talking about other analysis then yes they could be fail to judge sideways market conditions. But personally I also like side ways market much because its not suit to my trading style and I got problem with side ways market in trading. I have seen many trader's who are happy with side ways conditions, I think management totally depend upon us so for some sideways is good and for some its not good.

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    Registered user Hukam's Avatar
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    Quote Originally Posted by andry777 View Post
    I think it's depending on the method of trading itself, if you're trading with scalping strategy so it will be good for trading in sideways condition because scalping need to make good decision in short time and if you're trading in sideways condition so the risk will be lower than you're trading in trending condition. But still, it's depending on your money management and risk management to determine the risk in each transaction.
    Yeah for sideways market scalping could be much better trading strategy than other's, personally I have a support and resistance based trading system which covering everything side ways, uptrend, downtrend. I have a combination of moving average and support and resistance. I come to know that trend is also important for me and I should combine both for making money in forex.

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    Quote Originally Posted by Hukam View Post
    Yeah for sideways market scalping could be much better trading strategy than other's, personally I have a support and resistance based trading system which covering everything side ways, uptrend, downtrend. I have a combination of moving average and support and resistance. I come to know that trend is also important for me and I should combine both for making money in forex.
    All market conditions have their own advantages for trader's I am sure that so many trader's like to make money in sideways market condition and for a technical trader its one of the best gift in the market. Many of us like to fly with the market swing or the market trend volatility. No matter which kind of trading strategy we have all have equal chance to make money in forex, don't forget that our earning not only based upon strategy we have to follow strict management too.

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    the rail rate on movesment those gives of chance as trader might defines of decision on earning with the continunous outlays on ripples to gain of closing with the target profit as occupying use as best to match with the profile of entrance on measuring risks of the deliverance from the market.

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