Consolidation in Forex Charts
It’s important to notice when prices are moving sideways in forex price charts. When this happens, you’ll want to use different rules for trading forex.
The market is always moving relative to time on forex charts.
It can move in three directions: upward, downward, and sideways. If the market is moving upward or downward it is trending and if it is moving sideways it may be in consolidation.
Consolidation (also referred to as accumulation, bracketing, or sideways movement) occurs when prices establish a tight trading range create somewhat equal levels of support and resistance (that is, the support and resistance lines are roughly flat and parallel to each other).
To qualify as consolidation prices must be moving horizontally in a tight trading range (20-60 pips between the high and the low of the given trading period) for 6 hours or more. Each forex chart has its own overall trading range, while consolidation ranges can exist within that forex chart.
Notice how prices consolidate on this forex chart before breaking out to a signifcant downtrend
Forex Price Consolidation
Consolidation usually (but not always) occurs right before a major breakout. There are two key reasons why the market would be in consolidation: first, forex prices on the charts have reached the value that traders are willing to pay (not more, not less).
In this case the game between the bulls and the bears is tied up. As in any game, however, one team will pull out ahead again eventually. The second reason why the market would be in consolidation is that traders are not trading, because they’re waiting for a fundamental announcement.
In my next blog post, I’ll describe the basics of forex fundamental announcements. Understanding what to look for and what to avoid in forex fundamental announcements is a valuable skill to have when looking at forex charts and trading the forex market online!
Tags: accumulation, consolidation, forex charts, fundamental announcement, swideways movement Posted in
Rapid Forex on 
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April 4th, 2010 at 7:09 am
Hi Brian,
This is a refreshers’ course. It is quite good that we continually remind ourselves of the basics of FX trading. Now you have bring it again to the fore that trading in non-trending market should rather be avoided (or handle with great caution if you must trade in it..)
Thanks… Wale Adebo
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April 12th, 2010 at 10:26 am
Hello Brian,
You are just simply too much! Like I informed you in my maiden post in this blog, I’m a complete novice or newbie, to FX Trading,if you prefer to so describe me.But one clear signal I’m getting from all your posts is that your lessons cum your well-crafted tutorials can make even a dead horse to rise and respond positively! Yes, you heard me correctly. If a dead horse could rise and ….why should I not aspire as a higher being, to be counted worthy in FX Trading in no distant time?
I’m surprised to observe that inspite of your world tour, you still keep abreast with our eCourse Lessons – now bringing it to the 10th. A VERY BIG THANK YOU, BRIAN.
Is it permissible to reply to old posts at any point in time rather than the current one? FX questions next post. Stay blessed. Augustine
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Rapid Forex
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April 12th, 2010 at 1:21 pm
Augustine,
Thank you for your comments.
I read all comments, so you can always post one to ANYTHING on the blog. I’ll read it later that evening, or by the next morning (depending on our time zones).
I love your explanation of a “dead horse” – that’s a great way of putting it. I’m looking forward to breathing some life into tons of dead horses
Keep sharing your thoughts, I really do enjoy reading them.
Aloha from Maui,
Brian
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April 28th, 2010 at 12:33 pm
Hi Brian
Do you trade when the market in consolidation or you prefer the breakout or trade both style?
Thanks.
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May 25th, 2010 at 7:11 am
Hi
I am trying to learn but taking it slowly because its not easy, but the one thing I would say to people is the magic of compounding your money over time , 100 pips a month = 20 x your money 60 pips amonth about 6 x your money in a year or there about.an honest broker is important I think oanada is honest, lets hope I can learn this and make a few pips a month
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May 25th, 2010 at 9:46 pm
Thanks for the great info. What is the suitable strategy to trade in a sideway (range) market?
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Rapid Forex
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May 26th, 2010 at 12:49 am
@Omer – I haven’t discussed that on the blog yet. I’ll be doing so during the 90 day free forex trading bootcamp.
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