When stock prices begin to move inside a certain range, falling to established lows and then bouncing back up to established highs and fall back again, the stocks are alleged to be in a consolidation or congested phase.
Much of the time, typical consolidation patterns can be seen, with the most common one being the rectangle pattern or often called a price "corridor" or channel.
When costs start to drop, traders get frightened and puny holders will sell their stocks in order that they will fall to a support level which other traders will consider a fair price to purchase. From that level, stock costs will then rebound, regularly with volume as support comes into the stock.
As the cost of the stock improves and increases, it will reach a top where traders who've purchased the stock at lower costs will sell. At the exact same time, puny holders who have acquired the stock at heavier prices may want to bail out as their losses are narrowed with the improved costs. At this point in time, resistance is encountered and the share price then tops over to create a top.
When you connect the support costs and the peak prices where the price tops over, you'll find the pattern of a channel or a rectangle.
During consolidation phases, costs trade within a range formed by the bottom of the channel or rectangle and the top of the rectangle or channel.
Technically, the use of oscillators will be suitable for trading inside congestion phases. The key is to identify the bottom of the channel and to buy nearer to the bottom of the channel and to sell as prices reaches the head of the channel or rectangle.
A common mistake newer trader's commit is to use their trend following trading methodology during a choked phase and encounter a lot of whipsaws as prices oscillate between tiny ranges.
When you transit from a bullish market and moves into a bearish market, be happy with smaller gains which come from trading the choked and consolidation phases. Fall back on oscillators to trace your stock prices and trade them in relation to their location in the price rectangle pattern you can easily identify in your stock chart.
Much of the time, typical consolidation patterns can be seen, with the most common one being the rectangle pattern or often called a price "corridor" or channel.
When costs start to drop, traders get frightened and puny holders will sell their stocks in order that they will fall to a support level which other traders will consider a fair price to purchase. From that level, stock costs will then rebound, regularly with volume as support comes into the stock.
As the cost of the stock improves and increases, it will reach a top where traders who've purchased the stock at lower costs will sell. At the exact same time, puny holders who have acquired the stock at heavier prices may want to bail out as their losses are narrowed with the improved costs. At this point in time, resistance is encountered and the share price then tops over to create a top.
When you connect the support costs and the peak prices where the price tops over, you'll find the pattern of a channel or a rectangle.
During consolidation phases, costs trade within a range formed by the bottom of the channel or rectangle and the top of the rectangle or channel.
Technically, the use of oscillators will be suitable for trading inside congestion phases. The key is to identify the bottom of the channel and to buy nearer to the bottom of the channel and to sell as prices reaches the head of the channel or rectangle.
A common mistake newer trader's commit is to use their trend following trading methodology during a choked phase and encounter a lot of whipsaws as prices oscillate between tiny ranges.
When you transit from a bullish market and moves into a bearish market, be happy with smaller gains which come from trading the choked and consolidation phases. Fall back on oscillators to trace your stock prices and trade them in relation to their location in the price rectangle pattern you can easily identify in your stock chart.
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