The Four Different Sideways TrendsIn the modern Market Structure, stocks, indexes and industry indexes move sideways or trend moving horizontally most of the time. Understanding this phenomenon and how to use it to your advantage is important to learn.
There are 4 different types of price moving sideways:
1. The consolidation is a very narrow price range, often less than 5% but can be wider. The consolidation trend usually lasts a few days to a few weeks. The price action is very tight and small. Pro traders dominate consolidations usually. Price pings between a narrow price range low and high. Price is a penny spread or few pennies at most. This means the candlesticks are very very small and tightly compacted.
Consolidations are relatively easy to identify on a stock chart. These pattern create a liquidity shift which an HFT AI algo discovers and triggers its automated orders to drive price up or down based on the positions the pro traders are holding.
Consolidations create fast paced momentum and velocity runs that you can take advantage of IF you learn to enter the position BEFORE HFTs and then the smaller funds, retail day traders and gamblers drive price upward. You and pro traders ride the run until you see a Pro trader exit candle pattern to close the position.
2. The Platform Position sideways trend is also very precise with consistent highs and lows. These are the realm of the Dark Pools hidden accumulation and if you are trying to day trade a platform then it will whipsaw and cause losses. The width is too narrow for day trading. The platform is about 10% of the price in width. Platforms form after a market has had a correction and numerous stocks are building bottoms. Once the bottom completes and the Dark Pools recognize that the stock price is below fundamental levels the Dark Pool raise their buy zone price range to a new level. Often HFTs gap up a stock and then Dark Pools resume their hidden accumulation at that higher level. The goal is to enter just before the HFT gap up to the new fundamental level for swing or day trading.
Platforms offer low risk and the position can be held for weeks or months generating excellent income with minimal time for busy trades who do not have the time to swing trade. Platforms are also good for swing traders if they time their entry correctly.
3. Sideways trends are a mix of retail investors and retail day traders, smaller funds managers and sometimes Dark Pools hidden within the wider sideways trend. These trends with the wider mix of market participants have inconsistent highs and lows which often times causes retail day traders losses as they do not understand the dynamics of the wide sideways trend. These sideways trends are more than 10% and as wide as 20% of the stock price.
4. The Trading Range is the hardest to trade and often causes the most losses as frequently the trading range is so wide it is not easily recognized on the daily charts but is visible and obvious on a weekly chart. The inconsistent highs and lows within the very wide trading range cause problems and losses for most day and swing retail traders.
The size differential of each sideways trend tells you WHO is in control of price and how to trade it for maximum profits, lower risk, and to make trading fun rather than harder.
