Sideways trend

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""In this business if you're good, you're right six times out of ten.
You're never going to be right nine times out of ten".
(Peter Lynch)

With the term sideways trend is indicated the third trend, the lateral one. Also called trendless, the sideways trend allows the creation of lateral formations, such as the rectangle continuation. The bullish and bearish forces are in equilibrium, the lack of a defined trend doesn't leave space for traders that chase the trend, and the attempts of prices to exit a sideways phase become often false signals.

A common problem

Not just traders get out frustrated of this market phase; the vast majority of trading systems are trend following and, by definition, they follow tendencies that in sideways phases are not bullish nor bearish, but belong to the equilibrium, to indecision, to laterality. The indecision transform operative signals in losses, until the lateral trend is replaced by a new bullish or bearish trend. For a position trader, lateral phases are insidious traps that have to be recognized as quickly as possible; the performance needs to be reduced and then stopped, until the lateral phase lasts.

This is the point where main problems rise, because the majority of traders don't understand that to stand still and not to do anything are two different things. Learning how to stay still is as important as learning how to buy and sell, waiting is source for future occasions. After all we are talking about the third trend, the lateral one! future. Dopotutto parliamo del terzo trend, quello laterale!

Laterale.jpg

Two years of lateral movement are straining the nerves of position traders; laterality is lasting 2 years and the monthly graph highlights the lateral trend.

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