BTCUSD: What Does Sideways Consolidation Inside a Trend Mean?
Bitcoin has been forming a nice balance area for the past several days. Sideways consolidation after a trend is a stronger indication for that trend to continue than a pullback is. Sideways trading after a strong down trend should be viewed as a pullback that's unable to actually pull back. This is happening because new sellers are entering the market as fast as old sellers are buying back their BTC for profit. Buyers are unable to auction price higher during this phase as they are consistently met with sellers at the top of the range. If the buying support at the bottom of the range is mostly provided by old sellers buying back their positions, then this actually takes buying power away from the market over time.
For short term time being, rangebound rules apply as long as we range. Sell the top of the range and buy the bottom. Expect price to eventually break out to the downside and continue the trend. Wait for confirmation of a breakout before transitioning from rangebound trading rules back to trend trading rules.
The quicker that you can recognize whether the market state has transitioned from trending to rangebound or vice versa, the more success you will find in trading the market. Trend traders in a rangebound market end up buying tops and selling bottoms and get cut to pieces in the middle. Rangebound traders in a trending market tend to get run over picking tops and bottoms. If you can't identify the current market state, then you don't have a trade. Wait for structure to develop to provide you the context you need to make an informed decision.
Trade well everyone.
For short term time being, rangebound rules apply as long as we range. Sell the top of the range and buy the bottom. Expect price to eventually break out to the downside and continue the trend. Wait for confirmation of a breakout before transitioning from rangebound trading rules back to trend trading rules.
The quicker that you can recognize whether the market state has transitioned from trending to rangebound or vice versa, the more success you will find in trading the market. Trend traders in a rangebound market end up buying tops and selling bottoms and get cut to pieces in the middle. Rangebound traders in a trending market tend to get run over picking tops and bottoms. If you can't identify the current market state, then you don't have a trade. Wait for structure to develop to provide you the context you need to make an informed decision.
Trade well everyone.