Normally, traders will easily predict uptrend or downtrend market signals. From there, make trading decisions with the lowest risk, while increasing profits. However, the sideway bar status makes investors confused, not knowing what the next trend of the market is. So what specifically is a sideway? What is the correct investment strategy when encountering a sideway? Let‘s Learn Forex Trading yourself now!
What is a sidebar?
Let’s learn about the concept of sideway or sideway bar and the meaning of this state in forex and stock investing.
What is Sideway?
Sideway in stocks or forex trading is a sideways state of the market. That means the market does not increase, does not decrease, and has no clear trend. At this time, the sideway bar chart will have prices fluctuating between resistance and support levels. Usually, the range and distance between these two levels are quite narrow, occurring within a certain time frame.
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Meaning of sideway bar in investing
In investing in forex or stocks, the sideway bar state will cause investors difficulties. There is no clear sign or signal confirming whether the trend will be down or up. Therefore, investors easily fall into a passive state. Just sit and wait for the next sign before daring to make a decision.
The time when the market moves sideways is also the time when investors often rest and observe. Meanwhile, some scalpers will exploit this opportunity to the fullest. They base orders on resistance and support levels to place orders and make small profits.
When does the sideways market start and end?
The sideway bar state often appears when the stock price is near its peak during an uptrend period. Or bottoming out in a downtrend. The sign that the market is starting to move sideways is the price continuously reversing. Usually in a time frame of 1 hour or more, the price fluctuates rapidly at resistance and support levels with no signs of stopping.
In other words, the sideway bar area usually begins when the uptrend/downtrend trend ends. On the other hand, the stock price has had 4 reversals but a new bottom/peak has not been established.
Sideways will be broken when supply/demand is large enough. At this time, the stock price will have a clear move. Or some good news is released, supporting the breakout stocks. When the sideway bar ends, the market can switch to a downtrend or uptrend state.
Why does a sideway market happen?
Commodity prices, specifically forex pairs or stocks, will not increase or decrease forever. There will be price recovery or price adjustments. Similar to an up-and-down sinusoidal graph. During this period, the market often moves more slowly to start a new state.
Therefore, the sideway bar phase is when traders need to be calm. Technical analysis methods should be applied in combination with news updates. From there, assess the upcoming situation to make the most appropriate decision.
What sideway indicators are there?
To quickly recognize that the market is moving in the sideway bar area, investors can rely on the 4 types of indicators below.
Single chart table – When is the market sideways?
A single chart is the simplest sideway indicator for investors. A single chart in the sideway stage provides the clearest indication of whether a stock’s price trend is increasing or decreasing.
Investors should determine the bottom and top of the price fluctuation indicator line. In case this line does not create a new peak higher than the old price or a new low lower than the old price, the market may be entering the sideway bar area.
ADX sideways indicator
ADX indicator stands for Average Directional Index. Or more precisely, the indicator line has a scale ranging from 0 to 100. This indicator is not simply a downward or upward line of the price chart. Investors often use the ADX indicator to analyze the strength of price trends. Especially determining when the sideway bar state begins.
The lower the ADX, the smaller the price fluctuations. More specifically, when you see ADX lower than 25, it means the market is establishing a stable trend. At this time, the price may move sideways.
BB sideway indicator (Bollinger Band)
The Bollinger Band (BB) indicator is composed of 3 lines. Includes: 1 SMA (Simple Moving Average), 1 upper band, 1 lower band. When this indicator is low, the Bollinger Band narrows and a sideway state appears. At the same time, the price chart will move sideways, fluctuating with a small amplitude.
RSI indicator – RSI threshold when sideway
RSI – Relative Strength Index is a correlation strength index, showing strong market price fluctuations. When RSI goes up and down around 50, a state of balance between supply and demand appears. At this time, the market is in the sideway bar area.
How to invest smartly in the sideway bar area
In the sideway state of the market, investors have many options. Some people sit quietly and observe, others make the most of this opportunity to make a profit.
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Actively buy and sell in the sideway market
The sideway bar zone can last for several days, months, or even nearly a year. Especially during periods of inflation, stock prices do not change throughout the year, meaning investors are losing money.
Therefore, investors need to choose a reasonable time to trade. From there, minimize losses while optimizing profits. When the market shows signs of exiting the sideway zone, start buying and selling stocks.
Hold cash and choose other stocks
In the sideway bar area, the price will move in a small amplitude and horizontally. Therefore, investors can hold cash and search for potential stocks with clearer trends. Instead of just throwing money when you’re not sure what the next market will do.
Increase the sideway bar border level
The price will fluctuate between resistance and support. Therefore, many investors consider it safe and stable. However, this state will be broken at any time and the price will increase and decrease quite sharply. Therefore, investors should increase the fluctuation range by 10% compared to the resistance and support levels. This will help investors’ capital be maximally protected.
Take profit within the sideway bar range
Although it is difficult for investors to determine trends and make decisions with sideways markets. However, you can still make a profit if you have a method. The simplest is to buy low, sell high, and eat the price difference with the order to make take profit.
Patiently wait for the sideway market to end
The sideway state will end, whether sooner or later. The longer the sideways market lasts, the stronger the breakdown/breakout will be. You can use technical signals to predict when the market will turn to a breakout/breakdown. From there, act early to benefit.
Conclude
Above is all the important information that investors need to know about a sideway bar. Learn Forex Trading hopes that through the article, you will understand what a sideway is as well as decide whether to invest smartly or wait in this market state. I hope you will learn a lot of knowledge and be successful with investing.
FAQ
What is Sideway?
Sideway is a state in which the stock price moves sideways for a relative period, with a stable amplitude. No specific up/down trend is formed.
The simplest sign to identify the sideway bar area?
You can recognize sideways simply by observing. If you see the chart price (time frame from 1 hour or more) continuously reversing up and down around the resistance and support mark and shows no signs of stopping.
Should you invest in the sideway bar area?
Investing when the market sideways depends on each person’s perspective. Some investors will hold cash and choose stock codes with a clearer trend. Or wait until the market shows signs of breakout/breakdown. Some people will take advantage of the period of stability with amplitude to benefit from the price difference.
