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Thread: Price action trading in sideways market

  1. #1
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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.

  2. #1631
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    You might have a bit of a challenge when you are confronted with trading price action within a market that is clearly in a range, you will not be able to get a signal that will be profitable, so what I believe is that we should trade based on the trend or avoid the market when we see that every thing is clearly moving sideways, that way we will avoid losses.

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  3. #1632
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    With price action trading we can trade in sideways market or in trending market what we need is look at charts and know the market situation. If we want to trade trend we should wait for the right signal for that and never go for a trade anytime before. Market remains in ranging mood for about 70% times, for trends we should use higher time frames and keep a lot of patience.

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  4. #1633
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    It is not easy to trade when there is no clear cut movements in the forex market, trading price action under the market that is sideways is very dangerous, it is expected that we stay away or adopt a support or resistance strategy meaning that we must understand the two boundaries where price has settled into and trade from either the top or bottom as we see the opportunity for entry.

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  5. #1634
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    Yes sir i think that your point is right on the reluctance of traders to trade the sideways because of the tradition fear that has been built in our subconscious mind that it is a dangerous way of trading the market. The fear and ignorance is always there that when you trade the sideways market either in the form of a price action system or otherwise, then you stand a very higher chance of losing money, even though this still do not stop us from losing to the market with other approaches that we have been using.

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  6. #1635
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    I think the important thing is we already have a clear strategy and we understand it well and if we experience a loss then it is part of trading risk. And the price action trading strategy it is very good and most effective way in trading we have to work according to the best techniques we can use, then we have gotten a better trading knowledge regarding that method we want to trade with. Furthermore, the traders who trade we with price action will go for those times that the price action will align for either the bullish trend or the bearish trend, that will make income for the trader. So Forex learning and trading experience always help us to make good.

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  7. #1636
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    When the market begins to move in the sideways direction, i do not like to trade it because i do not consider that to be a trend as far as i know. The trend of the market has to do with either an uptrend or a downtrend direction. This is the way i have by training learn how to trade the market . But your professional explanation here about how to take advantage of the sideways market is a very good one and a lot of sane ideas has been passed across by the many charts here as applied.

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  8. #1637
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    We should take time and then invest more and more on learning how to make analysis, because over all , the main thing is on making good analysis, once the trader can make good analysis, I am seeing them as the sort of trader who will be able to succeed on a long time, side ways market could be hard to trade on, but then again, it is one of the best time when I see some price action traders likes taking trades.

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  9. #1638
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    Quote Originally Posted by glory3 View Post
    When the market begins to move in the sideways direction, i do not like to trade it because i do not consider that to be a trend as far as i know. The trend of the market has to do with either an uptrend or a downtrend direction. This is the way i have by training learn how to trade the market . But your professional explanation here about how to take advantage of the sideways market is a very good one and a lot of sane ideas has been passed across by the many charts here as applied.
    Always a best decision to stay way from market while it's moving in sideways because market is currently lose its interest from traders or it's still waiting for important boost to start creating another volatility jumps. Price action is a flexible strategy which is effective in all movements but for less complexity we better use it when market is moving in trend not in sideways.

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  10. #1639
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    Before any one can use price action for good trading he has to build the knowledge of using pin bars and some other patterns and SOR levels. There are many chart patterns but we should use those patterns that are properly explained in this forum and first use them on demo. So unless we do the efforts from ou side there will not be any good kind of trading that we will be able to conduct in Forex.

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  11. #1640
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    Generally market moves sideways 85 percent of time and it is in trend only 15 percent. Traders should use higher time frames H4, D1 and to determine strong support and resistance levels and the general market direction. Market will move between support and resistance levels and trade can use the trading between levels in order to earn money.

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