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What to do when the market is flat?

Trading

5 min read

At any moment in the market can move in three directions: up, down or sideways. As you may already know, the flat market (that is, that moves sideways) is considered by many to be the ideal time to trade. The point is that when the market is flat, it is also difficult to predict accurately. Reduced volatility implies that the potential profit is lower than the periods in which net movements are detected. However, when the market is flat and trading activity is reduced, there are plenty of things that a trader can do.

If you are a trader working on the trend, you will want to stay on the market when the momentum proves strong. It does not matter whether the trend is positive or negative, as both can offer great trading opportunities. During the flat market, most professional traders abstain from opening new positions.

Here is a list of the three things you can do while waiting for the market to gain new momentum.

Update your trading diary and analyze your performance

It may seem a little engaging, but it is a passage of fundamental importance. The trading diary is a collection of all operations and related information. What kind of information does it contain? Everything that you consider important, from your emotional state to market observations. Write down the conditions of the market at times of opening and closing operations, what went well and what you could improve, your mistakes and your observations. When the market consolidates (becomes flat) it is the right time to review the diary, evaluate the effectiveness of your trading system and make the necessary changes. You can read more on the subject in this article. When applied correctly, the trading diary can improve your overall performance.

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Fundamental research and sector analysis

It is no secret that almost all listed assets are strongly influenced by fundamental factors, be they economic, social, political, etc. When the market is calm, there is certainly a fundamental explanation that you can find and use for your future business. For example, when a company is traded in a narrow corridor, this probably means that the market is waiting for an important announcement or the publication of the earnings statement. During the flat market it is wise to devote oneself to seasonal or sectorial analysis with the aim of identifying new trading opportunities. Those interested in securities trading can also devote themselves to reading economic and corporate financial statements.

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Technical research and strategy evaluation

The flat market is also a good opportunity to perform technical analysis with the help of the tools and indicators available. Technical analysis can be complementary to your trading system and can allow you to deepen your knowledge of the broader picture of the situation. During this step you can observe the various assets on different time intervals and explore the market anomalies.

You can also evaluate your trading strategy and adjust it based on market changes. When an indicator stops working, it is advisable to try others. Or, completely remodel your trading system.

Conclusion

The flat market is undoubtedly one of the most engaging moments of trading and it is absolutely necessary to make the most wisely the time when prices move sideways. Take a break, evaluate your performance and try to find new trading opportunities.

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This article does not represent an investment advice. Any reference to past movements or price levels is informative and based on external analyzes, we do not provide any guarantee that such movements or levels may reoccur in the future. In accordance with the requirements set by the European Securities and Markets Authority (ESMA), trading with binary and digital options is only available to customers categorized as professional clients.

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CFDs are complex instruments and carry the high risk of losing money quickly due to the leverage effect. 76% of retail investor accounts lose money when trading with CFD through this provider. You should make sure you understand how CFDs work and if you can afford to take the high risk of losing your money.


Source: IQOption blog 2018-11-16 15:00:05

PLEASE NOTE: The articles on this website are not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.

In accordance with the requirements set by the European Securities and Markets Authority (ESMA), trading with binary and digital options is only available to customers categorized as professional clients.

Some of the links on this page may be an affiliate links. This means if you click on the link and purchase the item, I will receive an affiliate commission.

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This website is not intended for viewers from EEA countries. Binary options are not promoted or sold to retail EEA traders.

General risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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