A Forex consolidation period takes place when there is a continuation of ranging activity after a long-term movement of price. Consolidation means there is an absence of an upward or downward trend, and the price is confined only in a particular movement. According to the experts, a consolidated market takes place after there is a frequent occurrence of uptrends and downtrends. A currency exchange trader can easily determine the support and resistance levels in this market, and can easily make profit from the consolidated period. You can easily find a few examples of a consolidated movement of the CFD market.
Why FX market consolidation is the worst nightmare of the traders?
Most traders search for good market volatility because at that period, there is a good trend and price’s movement. To make a considerable amount of profits from the CFD market, an investor needs to look for a sharp movement. You can learn more about consolidation at Saxo. They offers free education resources to the novice traders in Hong Kong, so take advantage of it.
Investors will face several problems in ranging market if they use indicators to predict the movement. Some problems include, their trading strategies can’t generate a fruitful result in this market, and the indicators also give false signals about the market. In addition to this, the business people also find it troubling to make money from this situation.
However, it doesn’t mean that the investors can’t make money from a consolidated market. In fact, it is pretty much easier to make money from this kind of market, but you have to make profit on a micro-scale. It means that the business people can make money by accumulating small amounts from trades.
Is there any way to predict that the ranging market is going to take place?
In short, there is actually no way to predict the appearance of this market. If there was a way to predict this market, then every trader in this currency exchange market would be very rich. Though the developers have created a couple of techniques and some software to predict the movement, those can’t predict the market accurately. For all these reasons, a ranging market is the worst nightmare of investors.
In this article, we will reveal the four techniques that can help a trader predict the ranging market.
Four effective techniques to predict consolidated market
1. Analyzing the support and resistance
This is the first technique you can use to predict upcoming fluctuations of the market. You can identify the bottom and the peak value of the market quickly from this market. The resistance level is called the peak value at which the bullish movement ends. The bearish movement starts its new journey. The opposite is true for the support level, which is the bottom value of the trend. Remember that in a ranging market, you need to identify the major resistance and support levels.
2. Observing the recent economic or political events
This is another technique, which can help you determine the upcoming market condition. Lots of external factors like GDPs, interest rates, inflation, unemployment rates and central bank loans are controlling the ups and downs of the market and the economic performance of a particular state. Any major events that can quickly crash the entire Forex market or stock market. Analyzing the news or events is called conducting fundamental analysis.
3. Holiday periods
During December, one can easily notice this kind of market. Do you know why? It is because of the holidays. There are lower market volumes, and this is why the volatility is so low, which gives rise to a ranging market.
4. Structure breakdown of a trending market
Often there is a structural breakdown in a trending market, and proper knowledge about the trending market can help an investor to predict the upcoming consolidated market. In most cases, the price of the market starts behaving differently, which makes it easy to understand.
These four effective techniques can help an investor to overcome the problems they may face in a consolidated market.