Markets do not trend all the time. Often price moves sideways between a ceiling and a floor, in what traders call a range or sideways market (in Urdu, a market moving ek hi daire mein). Recognising a sideways market is important, because methods that work well in trends often fail in ranges.
How to recognise a sideways market
- Price keeps turning at roughly the same high and low.
- No clear higher highs and higher lows, or lower highs and lower lows.
- Moving averages flatten and price crosses them back and forth.
- Trend indicators such as Supertrend flip direction often.
The basic ways traders approach a range
- Trading inside the range: considering buys near the floor (support) and exits near the ceiling (resistance).
- Waiting for the breakout: staying patient until price closes clearly outside the range, ideally on higher volume.
- Staying out: many traders simply avoid ranges and wait for a clear trend.
Common mistakes in sideways markets
- Using trend-following signals, such as moving average crossovers, that keep giving false signals
- Buying breakouts too early, before a candle closes outside the range
- Ignoring that a range in one timeframe may be part of a trend in a bigger one (see multiple timeframe analysis)
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This article is for education only and is not investment advice. Trading shares, cryptocurrencies, forex and other markets involves risk, including the loss of capital.