How can we tell the market going sideways with price action?

hi,

there were times when i saw good signals (chart patterns, volume, etc) to long or to short and i entered a position. but then after one or two more candle sticks, the market turned out going sideways, hit the stop-loss and i scored a few losses. lucky me it’s all on demo account.

is it possible to detect sideways market with just price action before it happened?

i’ve done testings with indicators such as bollingers, adx, and 2 MA lines but i can’t say i’m satisfied with the results.

thanks

There are no sure fire methods of course.

Here is the way I anticipate consolidation. The last 2 to 4 hours of the NY session will generally be very quiet. The Asian open may continue the consolidation or break out.

After a strong move, I look for a reversal (don’t get fooled by a pullback and continuation). Once the reversal is complete, consolidation usually begins. This situation can happen at any time, but usually after a break out.

If I can’t recognize the stage the market is in, I bail and look for something interesting on TV to watch.

Once you recognize these patterns, you will notice them again and again.

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Correct, cause no one is satisfied with results trading with MAs :slight_smile:
Market is designed to get you on a trade and fail, unless you know what you are doing.
Banks do know how to take your stops and they do it every day. Think about this every time you put on a trade.

If only one can quantitatively define trend and consolidation… That would be the “holy grail”…

Been there, tried it several times and just couldn’t crack it. So much easier just to look at a chart.

This is far from the truth. There are certainly ways with MA’s to determine if the market is moving sideways. You are not going to find a sideways market using shorter time period MA’s like a 10 and a 20 together on a 5 minute chart unless you are trading on a tick chart. But you can use a 100 and 30. Also keep in mind the time frame you are looking at. If you want to find out what the market looks like and you are using 5 minute charts for entry/exit, then looking at a 30 min chart will give you a better idea of market conditions. As the lines get closer together you know you are consolodating as they get further you know you are trending.

I’m sure you’re familiar with Raygun, I think he may know… :wink:

I like to use Volumes myself. Although they dont represent volume as a whole, it shows the intrest in traders trading at that moment… This is also something instituations use, as they wont trade when no-one else is, so why should you or I for that matter… I like to use increaments of 50, so 1M TF= 50, 5M = 250 , 15M= 750, If the Volume is under those, stay out.

Also, the 14 MA is valuable to me, using Heiken Ashi Bar WITH-IN the 14MA range by 5 pips… If Heiken Ashi Bar is FULLY under/over, then you have action…

So, to Me, #1 price action, #2 Volume, #3 14 MA Over/Under

Ahem.

There are a million possible ways to recognize a trend or a range. Mas, sars, pa, …

Question is not to recognize what was going on in the [U]past[/U].

The future is unknown. Nobody can say if your trend or range keeps trending or ranging and how long. Every trend and range ends at any time in the future and future begins after the present (which is not really present at all, because present is infinitely small).

So, you have past and you have future and your job in a nutshell is it to find out based on the past how probable it is that a trend or range ends or continues.

Got it? :slight_smile:

Ask yourself what results did your backtest give you. If you have taken a valid signal then what happens next is a win or loss, nothing more.

If you’ve tested, stick with it through the losses. If you haven’t, test it.

Take ideas on how to improve the strategy in small tweaks at a time.

I tend to make my judgment call with what is indicated by the 10/21 MA and what is also going on with the weekly chart (I trade the daily).

It also depends on what your time frame of choice is. The lower you get, the less accurate candlestick signals tend to be. The higher the time frame, the more accurate they tend to be.

A bull trend is characterised by a series of higher highs and higher lows. (The opposite of everything I write here is true for a bear).

Every upward move is followed by a sideways to down correction (aka bull flag, retracement etc).

If the next move after a correction fails to make a new higher high then the trend has usually ended and the market will most likely move into a trading range or (less likely) begin a strong trend in the opposite direction.

Reversals or trading ranges usually begin after one of the two following sequences;

  1. Break of a major trend line, sideways to down correction, test of the trend extreme.
  2. Break of a trend channel line i.e. price curve becoming parabolic and therefore climatic, sideways to down correction, test of the trend extreme.

Be aware that after the final corrective move, the price may print a higher high slightly above the previous swing high before falling into an opposite trend/trading range, but a lower high is more likely.

Nothing in trading is exact or 100% certain! The price can begin trending in the opposite direction whenever the hell it feels like it. The truth is though 80% of reversal attempts fail and become bull flags and therefore with-trend entries, meaning that buying pullbacks in a strong bull trend is a mathematically superior strategy than shorting every top or reversal signal you see. Buy high sell higher in a strong bull trend!

The opposite is true when the price is trading within a clearly defined range, when the best trades become shorting a reversal signal at the top of the range or buying a reversal at the bottom. Sell high buy low in a range!