Forex Trading Tips On Sideways Condition
The forex market often moves sideways or moves in range (ranging) after trending. However, there are sideways conditions that can ditradingkan and there to be avoided.
The forex market often moves sideways or moves in range (ranging) after trending. However, not all sideways conditions are always the same, there is something that can be traded and there is to be avoided. Here are some tips if you want to trade on sideways conditions:
1. Determine the conditions of tradable sideways.
The sideways condition can be traded if limited by a clear price range. In this case the price oscillates or moves within a fixed range between the horizontal support and resistance levels. To find out whether the sideways condition is worth trading or can not be viewed by doing a ‘zoom out’, or see price movements at higher time frames. Does the market seem obviously moving trending, either uptrend or downtrend? If it does not look trending then move sideways. If sideways then decide whether to move in a clear range or move like sideways but not choppy. Here’s an example of a sideways condition with a clear trading range:
Seen on the chart above a clear trading range between key resistance levels and key support levels. These levels are the benchmark for entry and exit and where we see the possibility of a valid trading signal. With a clear range we can also determine the risk / reward ratio is adequate because the possibility of price movement from the level of support to resistance and vice versa is quite large.
2. Conditions that are ‘choppy’ not feasible to trade.
The choppy, sideways but irregular price movements are caused by a consolidating market where players are waiting for each other. Market conditions like this are not worth trading because the candlestick bar moves erratically so we are difficult to establish an adequate risk / reward ratio. Here is an example of a choppy condition after the price moves downtrend strongly :
Note that price movements are erratic and do not move in a clear range; the exponential moving average (ema) 8 and ema 21 curves are also close together and tend to move flat. Trading signals that arise in choppy state are usually invalid. If such market conditions should not be entry, wait for the price movement to resume trending or keep sideways but form a clear range.
3. Forex trading methods on sideways conditions
If the sideways condition is accompanied by a clear range, usually the trading method used is false break entry or entry when the price fails to break the resistance or support level as in the following example:
Signals for entry are typically pin bars or long-tailed bar pins that are rejected by resistance or support levels, and indicate false break conditions. In addition, the entry signal can also be formation of certain price action such as engulfing candle (bearish or bullish engulfing). By determining the stop loss at the highest or lowest pin bar level, and the target at the support or resistance level, then we can trade with an adequate risk / reward ratio.