So, we talked about the uptrend and the downtrend, but the trading magic doesn’t stop there!
Besides that, the market may be also following a sideways direction which is also known as trendless, range or flat market.
Fun fact, a sideways market may be viewed as “a wait and see” phase.
This is basically when traders wait for some important events to happen before they carry on trading. For example, the release of important economic news or maybe a company’s announcements.
Another reason for a trendless market is the lack of interest by the traders and as a result, not only there is no direction but also the market is characterized by low volume.
Nevertheless, during a range, prices are confined between two boundaries, zones, or lines; the upper line and the lower line. Remember that to draw a straight line, we need two points.
So, in our example, a minimum of two tops and two bottoms are needed.
The lower boundary acts as a support to the falling prices, whereas the upper boundary acts as a resistance to the rising prices. So, after the prices reach the upper boundary what do you think will happen next?
Well, they may rebound back to the lower boundary, and when prices reach the support area prices may bounce up to the upper boundary.
Now if that isn’t cool, we dunno what is!
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