What is Sideway? Market Investment Strategies

What is Sideway? Market Investment Strategies

What is Sideway?

Sideway is a market trend in the world of currency exchange when the asset prices fluctuate within a range between support and resistance levels without significant movements. It’s a period where prices stabilize, neither surging nor plummeting. The term “sideway,” when applied to the market, often poses challenges for investors as there are no clear signals indicating price increases or decreases. During this phase, some traders may choose to pause and observe how prices will develop next, or even withdraw from the market altogether. This period can also be seen as a time for assessing and evaluating all relevant factors before making decisions.

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Sideway form

Sideway typically begins and ends at the end of either an upward or downward trend. During this phase, the price of the asset has crossed four reversal points but has not yet established new highs or lows. This condition can repeat approximately three times between two support and resistance levels before the sideway trend is broken, and a new trend resumes when traders place new orders.

Sideway patterns also tend to occur during holidays or festivals when the market is generally less active. At this time, the market often becomes uncertain as trading volume increases again.

Why Sideway appears

Sideway appears based on the principle that market prices do not continuously rise or fall but always have periods of consolidation in between for all parties to review previous trade orders and assess resources to detect the next market trend. This phase can mark a transition in the market situation, shifting from a price trend to stability.

When the market is in a sideway phase, it can be both an opportunity and a challenge for investors. By capturing market volatility, traders can take advantage of profit opportunities or minimize risks effectively.

How to detect Sideway

Base on single chart

The easiest way to determine the presence of a sideway trend is to use a Line chart. In a Line chart, sideway is evident when there is no clear upward or downward trend, and prices continue to fluctuate between support and resistance levels without breaking through.

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Base on ADX

The Average Directional Index (ADX) is commonly used to assess the strength of price trends. When the ADX drops below the 25 level, the market often starts to move sideways. This implies that the price trend becomes weak for both the upward and downward directions on the chart.

Base on Bollinger Band

Bollinger Bands can also be used to detect sideways trends. When the Bollinger Bands narrow, it’s a sign of a sideways market. The narrowing of the Bollinger Bands occurs because the price continues to oscillate within a tight range.

Chiến lược giao dịch theo Sideway

When the market is in a sideways phase, there are several trading strategies you can apply:

  • Active Trading in the Sideways Direction: Monitor market fluctuations and take advantage of profit opportunities or minimize risks within the sideways market.
  • Prepare Cash in Advance: Instead of participating in trading during a sideways phase, you can prepare cash to be ready for the next trend.
  • Adjust Profit Taking and Stop Loss: In a sideways phase, prices often don’t fluctuate significantly, so you should adjust your profit-taking and stop-loss levels to ensure you don’t take too much risk.
  • Quick Profit in the Sideways Range: By buying at support levels and selling at resistance levels, you can profit within the sideways range.
  • Wait for Market Movements: Sometimes, a sideways trend can lead to a breakout or breakdown in the market. Traders can rely on technical analysis and indicators to predict the right time to take advantage of these movements.

When the market enters a sideways phase, whether to trade or pause should be based on each trader’s strategy and comfort level.

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