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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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    Quote Originally Posted by BOSST View Post
    A trader that follows the trend we know for sure that it is important to avoid side ways market,once the price starts going sideways then we know the market is already ranging,what professional traders do at that point is to wait for the price to break out in whatever direction then we follow after a retest.
    The side ways market is not bad to trade on, unless you don't know how to make analysis, but when you do know how to make analysis, then for sure the side ways market can be traded with the use of the support and resistance, all we have to do is that if there is a side ways market on the daily time frame then we can trade it from the daily time frame.

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    There is nothing special that we cannot trade in a market that we have considered to have entered the sideways mode, all we need is simply to change our tactics which means we should sell at the top and look for opportunities to buy beneath, sometimes the way we trade will determine whether we should even look for an opportunity immediately the market has entered a range or we should stay out.

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    Registered user Killer_Queen's Avatar
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    Quote Originally Posted by Leonvic View Post
    There is nothing special that we cannot trade in a market that we have considered to have entered the sideways mode, all we need is simply to change our tactics which means we should sell at the top and look for opportunities to buy beneath, sometimes the way we trade will determine whether we should even look for an opportunity immediately the market has entered a range or we should stay out.
    sideways market is the time when market moves so slow and it is a perfect time for us to take our time to enjoy the day without trading, which i mean to take a day off until market returns with suitable volatility that suitable with our strategy. price action may works in any volatility in market but less traders likes to trade during sideways as they prefer with more challenging market in good volatility.

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    Registered user amjad23510's Avatar
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    Quote Originally Posted by Killer_Queen View Post
    sideways market is the time when market moves so slow and it is a perfect time for us to take our time to enjoy the day without trading, which i mean to take a day off until market returns with suitable volatility that suitable with our strategy. price action may works in any volatility in market but less traders likes to trade during sideways as they prefer with more challenging market in good volatility.
    I really love side way market trend and it is really profitable for me.i work in both directions like sell and buy and i can make money during such a trend and must have a stop loss for each and every trade because market can start smooth move any time and mostly play buy stop and sell stop with proper stop loss and it helps to go with market and earn some more pips by recovering loss.

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  6. #1535
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    Once price starts going sideways as a trend trader that is the time to exit or your trade or you can still hold on to the trade if your entry is good,but it is not a good time to pick a trade in the market,only scalpers can trade sideways market,to make quick pips and jump out,volatility is what pays a trend follower.

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  7. #1536
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    Yes sir you say right , i like your points .price action is the best way of the trading . we can see the position of the trading . there are different way of the trading . good experience and well knowledge reward huge money in the trading . we can see the latest position of the market . it tell the best way of the earning .

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  8. #1537
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    The side ways market is the type of movement that you see on the chart when the market is not trending and it is a good movement from the market. the best way to trade it is to have the price action mechanism when trading then you could see the right time when to make good decisions in the market. The decisions the trader has made through learning will determine the long term results.

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    If there is no trend then price is moving in side ways market that situation for trader is very important because we have to make our trade ideas accordingly , we have to get understanding the previous trend may over or we have to looking for the opportunity in reversal of market overall these are benefits of trading with it .

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  10. #1539
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    Identifying the ranging market is not all that difficult because all we need to do is to find out where the price starts and ends on the daily basis and know whether they are trending or within a range of a particular place. Personally I have always used the Bollinger Bands to identify whenever the price is the range because the lines shall start squeezing together and price would hardly move away from the lines. I must admit that I have always find it hard to trade the ranging market because my trading strategy does not trade it and my best means of trading is following the trend all the times.

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    Registered user ola4real's Avatar
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    Quote Originally Posted by Killer_Queen View Post
    sideways market is the time when market moves so slow and it is a perfect time for us to take our time to enjoy the day without trading, which i mean to take a day off until market returns with suitable volatility that suitable with our strategy. price action may works in any volatility in market but less traders likes to trade during sideways as they prefer with more challenging market in good volatility.
    Not at all, the sideways market does not necessarily means that the market condition at that time will be slow, there are times that the market will be so fast and it will be moving in sideways pattern. What i will like you to know is that the sideways movement in forex field is a pattern, and it will create the situation where there will not be trend at that time. The best is for forex traders to avoid this kind of market condition.

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