When stock costs 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, standard consolidation patterns can be seen, with the most typical one being the rectangle pattern or occasionally called a price "corridor" or channel.
When costs begin to drop, traders get scared and puny holders will sell their stocks so 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, frequently with volume as support comes into the stock.
As the price of the stock improves and increases, it will reach a peak where traders who have purchased the stock at lower prices will sell. At the same time, weak holders who have purchased the stock at higher prices may wish to bail out as their losses are narrowed with the improved prices. At that point in time, resistance is encountered and the stock price then tops over to form a peak.
When you connect the support prices and the peak prices where the price tops over, you will find the pattern of a channel or a rectangle.
During consolidation phases, costs trade inside a range formed by the base of the channel or rectangle and the pinnacle of the rectangle or channel.
Technically, the use of oscillators will be suitable for trading within congestion phases. The key is to identify the bottom of the channel and to buy closer to the bottom of the channel and to sell as prices reaches the top of the channel or rectangle.
A typical mistake more modern traders commit is to use their trend following trading methodology in a congested phase and encounter plenty of whipsaws as prices oscillate between a tiny range.
When you transit from a bullish market and moves into a bearish market, be contented with smaller gains which come from trading the congested and consolidation phases. Fall back upon oscillators to trace your stock prices and trade them re their location in the price rectangle pattern you can simply identify in your stock chart.
Much of the time, standard consolidation patterns can be seen, with the most typical one being the rectangle pattern or occasionally called a price "corridor" or channel.
When costs begin to drop, traders get scared and puny holders will sell their stocks so 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, frequently with volume as support comes into the stock.
As the price of the stock improves and increases, it will reach a peak where traders who have purchased the stock at lower prices will sell. At the same time, weak holders who have purchased the stock at higher prices may wish to bail out as their losses are narrowed with the improved prices. At that point in time, resistance is encountered and the stock price then tops over to form a peak.
When you connect the support prices and the peak prices where the price tops over, you will find the pattern of a channel or a rectangle.
During consolidation phases, costs trade inside a range formed by the base of the channel or rectangle and the pinnacle of the rectangle or channel.
Technically, the use of oscillators will be suitable for trading within congestion phases. The key is to identify the bottom of the channel and to buy closer to the bottom of the channel and to sell as prices reaches the top of the channel or rectangle.
A typical mistake more modern traders commit is to use their trend following trading methodology in a congested phase and encounter plenty of whipsaws as prices oscillate between a tiny range.
When you transit from a bullish market and moves into a bearish market, be contented with smaller gains which come from trading the congested and consolidation phases. Fall back upon oscillators to trace your stock prices and trade them re their location in the price rectangle pattern you can simply identify in your stock chart.
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