We will talk in this topic about a fairly common phenomenon in the Forex currency market, this is a flat (or sideways movement).
Theoretically, many people know that such a flat is, however, to correctly determine the trend at the exit from the flat on Forex, it is not enough to master the terminology - you need to learn how to confidently extract profit from the most unfavorable situations on the market.
The simplest definition of what a flat is the period of time when it will not be possible to make money, since the price is not very volatile: i.e. is at rest, does not fall or rise.
Since the main way to make money in the Forex market is speculative trading (making a profit from the Ask / Bid difference), there is no profit without a certain number of points of price movement - accordingly, the trader's income.
It should be understood that in a professional environment, profit is perceived not as an accidental entry into the market and “jackpot”, but as a conscious and planned implementation of a profitable transaction.
Flat on Forex is increasing risk, since a sideways or horizontal trend and smooth price fluctuations within 10-100 points can “eat up” all the earned profit. Therefore, for those with small deposits, a flat on the Forex market is not the best period for trading, since even a probable profit may not cover the spread - the difference between Ask and Bid (buy / sell price).
It is not difficult to determine the state of a flat on the price chart, since it is a long period when the smooth price movement is limited by an insignificant channel, up to a maximum of 100 points. As a rule, the price channel is limited by support and resistance levels, which can be easily identified by any novice trader. It is from the flat (or as it is also called the sideways trend) that the border "breaks out" and the price leaves in a certain trend.
Basic recommendations from professional traders for trading during a flat on the Forex market:
Flat Forex is also a "tip" for experienced traders. After the price has fixed at a certain level, then either a sharp decline or a sharp increase will follow. It is believed that a prolonged or “long” flat is a signal for a future strong trend. Although, of course, there may be exceptions ...
The ideal option is to use the tactics of experienced currency exchange investors who know well what a flat is and prefer to wait for certain news without risking a sideways trend. Low price volatility is perceived as “rest” or calm before new surges of a particular currency pair. Although for those who trade on different timeframes, you can get a good profit.
How to determine flat in Forex? Useful flat indicators
Regardless of the duration of the "lull", the main thing is to correctly identify the further trend and correctly enter the market. Since a flat on Forex is a “pre-start” of either a decrease or an increase in prices, the simplest option to minimize risks, which in real trading are called losses, is to use technical analysis tools for analysis, namely indicators.
A correctly defined stable trend after exiting the sideways trend is a guarantee of profit. Excellent helpers, in this case, are oscillators, the indicators of which fluctuate in the range from 0 to 100% around the line, showing the lows and tops of the flat in the Forex market and, accordingly, the points from which the market may be pushed either towards a reversal or along a trend.
Let's consider several technical indicators that can be used to determine a flat in the Forex market, and as a result, conduct an analysis for further entry into a position.
So, in order:
Using the interface, it clearly shows the presence of a sideways or trend trend in the market. Consists of: a line (yellow - no flat, green - there is) and a histogram, which determines sharp price movements on the chart.
The indicator of this instrument resembles a broken line that moves around the 0.5 level. It is quite simple to use this indicator: below the specified level - a trend, above - a flat on Forex, around 0.5 - uncertainty, during which trading is not recommended. The only condition for the correct operation of this tool is the use of the indicator as an additional or auxiliary one, since the complexity of the component does not guarantee a clear certainty.
Popular flat indicators, which have almost the same presentation formula on the chart, the only difference is in the construction of the range (Stochastic from 0 to 100, Williams - from -100 to 0). The main advantage of oscillators is high-quality signals in a quiet market, that is, during a flat, although delays and "sticking" are possible when exiting a sideways movement.
These oscillators are included in the standard set of technical tools of the Metatrader trading terminal, you can connect them in the "Navigator" window, the "Indicators" tab.
To accurately determine the price boundary, the following are also used: CCI, MACD, Envelopes, Price Channel and others. By the way, the main advantage of Envelopes is the combination of characteristics: this oscillator is suitable both as an indicator for flat and trend tendencies.