Tips for beginners on how not to make mistakes when trading
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Guys, today I want to share with you information from one interesting blog, for the last 3 weeks the market has not shown us strong volatility and we have to watch almost the same price range, I'm talking about the main cryptocurrency, Bitcoin.
So I decided to share this information for beginners in order not to make mistakes that can be so easily avoided in the future.
Let's start with you in order:
What is Consolidation or Flat?
Consolidation is the state of the market when it is sandwiched between support and resistance. This state means that a certain state of balance has arisen in the market between sellers or buyers, that is, demand has balanced supply. In other words, the market is in a state of accumulation or distribution. According to statistics, about 80% of the time the markets are in a flat state, so trading in a sideways range will always be profitable for traders.
For consolidation to become apparent, the price must touch the support and resistance levels at least twice. I think that it is clear here, this is a classic of technical analysis, trading from levels in FLAT.
Example below:
And so let's continue:
Consolidations can expand and contract.
An expanding consolidation occurs when the price makes a false break and moves back into a range, thereby expanding the space between support and resistance. Selling at resistance will force you to hit a stop as price breaks the current resistance level to then move back into the range.
Example below:
A shrinking consolidation occurs when the market enters a period of low volatility, for example due to an impending news release.
During periods of narrow consolidation, it is better to refrain from entering the market and making deals. But during periods of broad consolidation, you can trade from its borders. This will give us a good risk to reward potential. However, you should always remember that sooner or later the price will go beyond the range, a true breakdown of the level will occur, and the market will move into a trend phase.
The longer the market is in a flat, the more force the trend will follow after the price breaks out of the range. Any calm in the cryptocurrency market is replaced by explosive, and vice versa.
We got acquainted with the theory and I think there is nothing complicated, you can see all the examples on the graphs above.
Let's move on to the most important thing now:
Flat is a killer of deposits, why?
We have all heard or read on various forums that flat is the killer of deposits of trend traders. Actually, it is. If your trading system is showing outstanding results in a trending market, then as soon as the sideways movement begins, you can say goodbye to all the profits.
Let's take a look at the place.
The thing is that trend methods will give you signals to enter the market near support and resistance levels, and as soon as you open a buy deal, the price crashes into the level in just a couple of points, and after that a reversal begins. On average, the trading system will give 4 false signals, which will completely block the profits received when trading with the trend. Therefore, if you learn to identify a flat in the early stages of its formation, then the damage caused by it will be minimized, or even better, you will be able to use this state of the market to your advantage.
How to define a flat?
In order to correctly learn how to determine a flat, we must remember what it looks like. A sideways movement is a movement between two highs and lows, perhaps this will be enough. Let's look at the chart, try to identify any price fluctuation between the latest highs and lows.
Shown below is an example:
Red circles mark the first minimum and maximum. As we can see, the subsequent price movement is within the range of boundaries we have drawn. Next, we can see how the price breaks the lower level and a strong downward movement begins, but it is worth noting that the price made about 7 bounces from the levels before that, which we could use for profit.
How to trade in the side market?
The best strategy for trading sideways markets is the false breakout. It usually gives a powerful impetus for the price to move in the opposite direction. Market makers always collect stop losses of traders at levels to gain liquidity and then move in the opposite direction. This should always be taken into account when trading false breakouts. You can set take profit and exit the trade on the other side of the trading range. I often mention this in my signals that MM collects stops and turns the asset in the other direction, this happens most often on strong
Guys, today I want to share with you information from one interesting blog, for the last 3 weeks the market has not shown us strong volatility and we have to watch almost the same price range, I'm talking about the main cryptocurrency, Bitcoin.
So I decided to share this information for beginners in order not to make mistakes that can be so easily avoided in the future.
Let's start with you in order:
What is Consolidation or Flat?
Consolidation is the state of the market when it is sandwiched between support and resistance. This state means that a certain state of balance has arisen in the market between sellers or buyers, that is, demand has balanced supply. In other words, the market is in a state of accumulation or distribution. According to statistics, about 80% of the time the markets are in a flat state, so trading in a sideways range will always be profitable for traders.
For consolidation to become apparent, the price must touch the support and resistance levels at least twice. I think that it is clear here, this is a classic of technical analysis, trading from levels in FLAT.
Example below:
And so let's continue:
Consolidations can expand and contract.
An expanding consolidation occurs when the price makes a false break and moves back into a range, thereby expanding the space between support and resistance. Selling at resistance will force you to hit a stop as price breaks the current resistance level to then move back into the range.
Example below:
A shrinking consolidation occurs when the market enters a period of low volatility, for example due to an impending news release.
During periods of narrow consolidation, it is better to refrain from entering the market and making deals. But during periods of broad consolidation, you can trade from its borders. This will give us a good risk to reward potential. However, you should always remember that sooner or later the price will go beyond the range, a true breakdown of the level will occur, and the market will move into a trend phase.
The longer the market is in a flat, the more force the trend will follow after the price breaks out of the range. Any calm in the cryptocurrency market is replaced by explosive, and vice versa.
We got acquainted with the theory and I think there is nothing complicated, you can see all the examples on the graphs above.
Let's move on to the most important thing now:
Flat is a killer of deposits, why?
We have all heard or read on various forums that flat is the killer of deposits of trend traders. Actually, it is. If your trading system is showing outstanding results in a trending market, then as soon as the sideways movement begins, you can say goodbye to all the profits.
Let's take a look at the place.
The thing is that trend methods will give you signals to enter the market near support and resistance levels, and as soon as you open a buy deal, the price crashes into the level in just a couple of points, and after that a reversal begins. On average, the trading system will give 4 false signals, which will completely block the profits received when trading with the trend. Therefore, if you learn to identify a flat in the early stages of its formation, then the damage caused by it will be minimized, or even better, you will be able to use this state of the market to your advantage.
How to define a flat?
In order to correctly learn how to determine a flat, we must remember what it looks like. A sideways movement is a movement between two highs and lows, perhaps this will be enough. Let's look at the chart, try to identify any price fluctuation between the latest highs and lows.
Shown below is an example:
Red circles mark the first minimum and maximum. As we can see, the subsequent price movement is within the range of boundaries we have drawn. Next, we can see how the price breaks the lower level and a strong downward movement begins, but it is worth noting that the price made about 7 bounces from the levels before that, which we could use for profit.
How to trade in the side market?
The best strategy for trading sideways markets is the false breakout. It usually gives a powerful impetus for the price to move in the opposite direction. Market makers always collect stop losses of traders at levels to gain liquidity and then move in the opposite direction. This should always be taken into account when trading false breakouts. You can set take profit and exit the trade on the other side of the trading range. I often mention this in my signals that MM collects stops and turns the asset in the other direction, this happens most often on strong
