I don’t like getting caught in sideways market action. Nothing bothers me more than seeing my hard-earned dollars tied up in the zigs n zags of a given trade – ranging sideways and going nowhere fast. As much as I understand this to be a common (far too common actually) and normal aspect of trading – sideways is a killer psychologically as “dead money” starts to weigh heavy on the brain. Trading capital is tied up as other opportunities present themselves, and a trader is left with his/her hands tied – unable to act.
When I get mixed signals across my intermarket analysis as well my shorter term technical system – I question if perhaps an opportunity has presented itself – or if I am looking at the initial stages of “sideways” and possible reversal. If a trend is still evident on the longer time frames such as a daily chart as well a 4H chart – I will then come down to the smaller time frames to see where we are at.
Kong’s Awesome Tip
On any time frame chart you are viewing – if price starts in the upper left corner of your screen, and ends in the bottom right -YOU ARE IN A DOWNTREND. If price starts in the bottom left corner of your screen and ends in the upper right YOU ARE IN AN UPTREND. Anything else – and you are sideways.
As simple as this may seem, it serves as an excellent exercise when looking to eliminate sideways action. Even if (to start) you only drill down to a 1 hour chart – and run this simple exercise, it should go a long way in helping you to avoid sideways market action, and possibly identifying potencial trade opportunities.