Sideway is one of the states that makes investors confused when making decisions. Unlike downtrends or uptrends, sideways often tend to move sideways, making it difficult for investors to judge. So What is sideway? How to determine the sideway state of the market? Let’s learn about this state with Crypto Trading through the article below.
Learn about the concept of What is sideway
Understanding What is sideway is an important step to master the stock market and make effective investment decisions.
What is sideway?
A sideways state in stocks refers to a situation where the market does not have a clear upward or downward trend. Instead, the stock price moves between two support and resistance levels on the chart. During this time, the price remains stable without touching the lower support level or the upper resistance peak.
In a sideways state, investors have difficulty making decisions due to the lack of clear signs or confirmation of an uptrend or downtrend. This makes investors’ psychology passive.
Sideways periods are often used by investors to rest and consider factors before making decisions. On the contrary, scalpers often place orders based on support and resistance levels to take advantage of sideways periods.
Start and end of Sideway phase
Sideways usually occur when a stock price is near the top of an uptrend or downtrend. The sign is that the price continues to fluctuate within the support and resistance levels without breaking through them.
Sideways usually start when an uptrend or downtrend ends. With the price swinging around 4 times but not forming a new top or bottom. Usually repeats 3 times between support and resistance levels.
The sideways state can be broken when there is enough supply and demand or positive news. This leads to a clearer price trend. After sideways, the market can move to an uptrend or downtrend.
Sideways often occur during Tet and holidays when trading is sparse, and will be broken when a strong reversal candlestick pattern appears.
See more: Learn Momentum – The 3 principles of optimal trading
What is the cause of the What is sideway state?
Prices cannot increase or decrease continuously but always have recovery periods. Investors can visualize coin prices as in Scalping. In the sideways phase, the market moves slowly, waiting for the next clear signs.
During this time, investors should stay calm, use technical analysis, and update news to predict upcoming market developments and make appropriate decisions.
Indicator to help identify the Crypto trading market in Sideway state
Indicators that help identify the sideways state of the Crypto trading market are important tools for investors to make accurate decisions.
Technical Analysis Single Chart
This is the simplest technical analysis method that helps investors identify the market is in a sideways state. On a single chart, the price trend indicator will highlight the sideways phase.
Specifically, investors should observe the peaks and troughs of the price indicator line. If this line does not create a new peak or trough higher or lower than the previous price, the market is likely in a sideways state.
What indicator is the Average Directional Index (ADX)?
Average Directional Index (ADX) is an oscillator that ranges from 0 to 100. It is used to analyze the strength of a stock’s price trend, not simply the up or down direction of the price chart. For this reason, ADX is popular in predicting sideways periods.
Specifically, when the ADX index is below 25, the market tends to stabilize prices (small price fluctuations) and prices may move sideways. The lower the ADX, the weaker the price fluctuations. ADX is an important tool to help investors assess market fluctuations before making decisions.
Bollinger Bands in Technical Analysis
The Bollinger Bands are made up of three lines: a Simple Moving Average (SMA) and two upper and lower bands. When the Bollinger Bands narrow, this indicates that sideways trading has occurred. Stocks often fluctuate sideways with small fluctuations during this period.
RSI indicator
What is stochastic indicator? Stoch RSI shows relative strength and represents market volatility. When the RSI fluctuates around 50, it shows a balance between buyers and sellers. This represents a sideways market state.
How to invest when the market is in a What is sideway state
How to invest when the market is sideways?
Invest according to market trends Crypto trading
Sideways trading can last from a few days to months or even years. In situations like inflation, holding stocks for long periods of time can mean investors lose value without even realizing it.
Therefore, choosing the right time to invest is important to minimize risks and maximize profits. Investors should buy or sell stocks when there are signs of moving out of the sideways state. That could be the first step into a new trend.
See more: Instructions for opening an MEXC global account
Actively hold cash
After understanding the meaning of What is sideway status, we realize that stocks will move in a price range without significant fluctuations. Therefore, keeping cash will help investors find potential investment opportunities with clearer trends. Using that cash to invest effectively is a wise option.
Increase safety margin in sideways state
Sideways markets often fluctuate between support and resistance levels within a relatively narrow range. This makes investors feel safe and stable. However, when the sideways market breaks out, stocks can fluctuate wildly, rising or falling in price suddenly.
Therefore, to protect capital, investors need to increase the safety margin to about 10% compared to the support and resistance lines of the sideway market. This will help them to better preserve their investment capital.
Take advantage of profit opportunities in a sideways market
In a sideways market, it becomes difficult to predict trends and make investment decisions. However, there are still ways to profit from sideways trading. One way is to profit within the range, buying at support and selling at resistance. Another way is to wait for a breakout/breakdown of the market.
Conclude
Above is all the information that investors need to know about What is sideway. Follow Crypto Trading to better understand sideways and methods of recognition to minimize risks and increase profit opportunities when the market fluctuates!
Frequently Asked Questions
How to protect capital when the sideways market breaks down?
Increasing the safety margin helps protect capital when the market breaks down. It helps investors avoid large losses when stock prices fluctuate strongly.
How does sideways affect investing?
Sideways increase the difficulty in predicting trends and making investment decisions. But it also creates trading opportunities for investors by making profits within the range and waiting for a breakout/breakdown.
Sideway how to make a profit?
Profit can be made by trading in the range or waiting for the market breakout/breakdown in a sideways state.
