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But like you say, no one knows and it is indeed very hard to predict markets. Other tools that can be used is the cross of a smaller moving average with the longer moving average when on trend when volatility is still low and increasing. The times where this trends form, or also something I discovered by watching the 4 hour chart is to use the drawing tool the linear regression to see where price is at the moment to see where price is within that range to follow buying the lows, selling short the highs Great stuff.
For some reason, you make money for 2 weeks and then you have bad weeks. Consistency is key here. One strategy I use when trading using trend in my system is to make sure that I am trading with the direction of the market. If the market is trending higher then I use that as wind behind my back so to speak so that the stocks I trade have that added assistance to be pushed higher along with the market. Has worked well for me in my trading. Amazing post, thank you for sharing, your website is a must and I like it so much.
Good job Rayner, much appreciated. Kindly to mention that you have a type error in the section — declining phase trading set-up. Which is the best strategy to use? In a declining phase, you want to employ a trend trading strategy to capture trends in the market. Moving average Support area Previous resistance turned support Fibonacci levels. Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. Have you made money in some months, only to lose them all later?
Or… You find a new trading strategy that makes money at the start, but stops working after a while? The reason is simple. The markets are always changing. If price shows rejection, then enter your trade at the next open. Which trading strategy to avoid? Trade along the path of least resistance, which is towards the upside. This is the stage where traders who do not cut their loss become long-term investors. An accumulation phase usually occurs when prices have fallen over the last 6 months or more.
But a distribution phase usually occurs when prices have risen over the last 6 months or more. Share 0. Tweet 0. Hey Sutiv, The thing is this… In the short run your trading results is random. I hope it helps! Thanks and great post here! Hey Jeremy, Yes looking at the direction of the overall markets would work well with stocks.
Hi Lu, Thank you for your kind words, I appreciate it. Hey Rayner, Kindly to mention that you have a type error in the section — declining phase trading set-up. Hey Ohlala, Thank you for your feedback. Hi Rayner, what software do you use to make those infographics? They look awesome. Essentially their taking trades in the middle of the consolidation rather than the extremes of the consolidation at the upper and lower boundaries. When you first identify the market has entered a consolidation, you should mark the upper and lower boundaries with horizontal lines.
Notice how every time the market hit one of the boundaries it turned in the opposite direction, this is the professional traders defending their positions. The lower boundary has professional traders who brought protecting their buy trades while the upper boundary has traders who sold protecting their sell trades. The best way to keep yourself out of bad trades when the markets consolidating is two split the consolidation into three parts.
The middle of the consolidation can be found by drawing a Fibonacci retracement from the upper and lower boundaries or by using the cross-hair tool on MT4 to determine the overall range in terms of pips then halving it. Now you have marked the three sections marked your able to establish where the best locations are for placing trades. If the market moves below the middle then you only want to be placing buy positions because the traders who brought creating the first swing up will want to protect their own buy trades.
Another thing to take note of is how the consolidation in the image above contains a consolidation inside it. This smaller consolidation follows the same set of probabilities that are present in the larger consolidation. Each trade you place should be exited when the market reaches the opposite boundary, if you place a buy trade when the market reaches the lower boundary you should be exiting your trade at the upper boundary, the point where your take some profit off your trade is when the market comes into contact with the middle line, When the market encounters the middle line the probabilities of the market turning in either direction are relatively equal, therefore its best to if take some profits off your trade in order to protect yourself in the event that the market begins moving against you.
Consolidation can be very difficult to trade correctly, whilst its impossible to not lose on a couple of trades when the markets are in a consolidation the method described above is the best way to make sure your always placing the right trades in the right location. Hi Tim, I must say you are am amazing trader and instructor. Your articles have really helped me and boosted by trading skills. I had serious issues with consolidating markets. But all my doubts are cleared.
Things have changed and am happy now. To nail it all, this lesson on consolidating market is an eye opener and remarkle way of trading ranging markets. Thank you very much, God bless you and keep doing what you are doing. How can I buy some of your books to read and enrich my skills. Go to the homepage and subscribe with your email. You will receive an offer by the end of this year or next one. Save my name, email, and website in this browser for the next time I comment.
Additional menu Home Strategies Technical Analysis Blog Forex Live Rates Consolidations often known as ranges are some of the most challenging market conditions people face when trading the forex markets. What Causes A Consolidation? A Consolidation is primarily caused by professional traders taking profits. I call these levels the upper and lower boundaries The upper boundary is the resistance level, the most likely place for the market to turn back down if it returns.
Once the price breaks through the identified areas of support or resistance, volatility quickly increases, and so does the opportunity for short-term traders to generate a profit. Technical traders believe a breakout above resistance means the price will climb further, so the trader buys.
On the other hand, a breakout below the support level indicates the price is falling even lower, and the trader sells. In financial accounting, consolidated financial statements are used to present a parent and subsidiary company as one combined company. A parent company may own a majority percentage of a subsidiary, with a non-controlling interest NCI owning the remainder. Or the parent may own the entire subsidiary, with no other firm holding ownership.
To create consolidated financial statements, the assets and liabilities of the subsidiary are adjusted to fair market value, and those values are used in the combined financial statements. If the parent and NCI pay more than the fair market value of the net assets assets less liabilities , the excess amount is posted to a goodwill asset account, and goodwill is moved into an expense account over time. A consolidation eliminates any transactions between the parent and subsidiary, or between the subsidiary and the NCI.
The consolidated financials only includes transactions with third parties, and each of the companies continues to produce separate financial statements. Technical Analysis Basic Education. Tools for Fundamental Analysis. Your Money. Personal Finance. Your Practice. Popular Courses. What Is Consolidation? Key Takeaways Consolidation is a technical analysis term used to describe a stock's price movement within a given support and resistance range for a period of time. It is generally caused due to trader indecisiveness.
Consolidations happen either during trending market phases or before a new trend. All consolidations represent a period in which the markets pause, where indecision about the next price move exist and where traders position themselves for the next move. We distinguish between three consolidation patterns: sideways ranges, downward or upward sloping ranges also called flags , or triangular consolidations triangles, wedges and pennants.
We will take a brief look at each pattern before exploring how to trade consolidation patterns. A range is defined by highs and lows which can be connected using horizontal lines. Price spends a lot of time ranging and knowing how to trade consolidations can be an important skill for traders. To shake off amateur traders, you can frequently see false breakouts and breakdowns during horizontal ranges.
Below you see that the market moved sideways at the top and the price had fake breakouts to the bottom and the top as well. It is, thus, very important to wait for a confirmed breakout where the price actually closed outside of the range. Flags are consolidation patterns that form during trends and they can be found between two trend waves.
Whereas amateurs often mistake flag patterns for a reversal, the professionals wait for the successful breakout and the trend continuation. Flag patterns are typically more reliable when the trend wave prior to the flag has been strong; it makes a trend continuation likely. Again, a trend without proper consolidations often leads to boom-and-bust behavior and then a trend becomes unsustainable. The most important factor when analyzing triangle patterns is the sequence of highs and lows and how the trendlines of the upper and lower boundary relate to each other.
We wrote a complete guide on how to trade triangles , which explains all the nuances in depth. When it comes to trading consolidations, there are three concepts traders need to be aware of which make trading more profitable and less risky. The hardest part of trading consolidations is to avoid getting caught in false breakouts.
The following three concepts help you identify high probability breakouts during consolidations. The clues given by volume analysis are typically subtle but they can tell you a lot about what is happening in that consolidation and what is likely to happen next. During a range, the volume is usually low and flat. But when price moves towards one end of the consolidation and volume picks up, it can foreshadow a potential breakout.
The screenshot below shows that each time price broke out, or was about to break up, volume showed an uptick. At the same time, whenever we saw a fake or failed breakout, volume was either low or declining. A consolidation is often referred to as a pot where the pressure slowly builds up while somebody is holding down the lit.
The longer a consolidation period and the narrower the boundaries of the consolidation, the stronger the subsequent breakout. However, the longer the range, the more traders will start paying attention to it and; long ranges will often have more false breakouts as the professionals try to shake off the amateurs. During long ranges, waiting for a confirmed breakout and not entering prematurely — predicting a breakout — is the key to successful trading.