Lateral trend (neutral, flat)
What is a flat on ?
Lateral trend (neutral) is also called "flat" (from the English word "flat"). A sideways trend reflects the stage of development of the value of securities and other assets, when price fluctuations are quite insignificant over a fairly long period of time. Most often, it occurs due to uncertainty in general world trends.
The sideways trend is countered by rising or downward. In technical analysis a neutral trend is indicated by side channel.
How to recognize and identify a neutral trend?
An indication of a neutral trend or a flat on the price chart is that the price highs and lows are located consistently at about the same level.
The neutral trend on the price chart of a currency pair, as well as other types of trends, is indicated by support and resistance lines, which are drawn, respectively, through the minimum and maximum and directed horizontally.
How to trade in a sideways trend?
Flat on - is the time when the forces of bulls and bears are approximately equal and there are not enough of them to form an uptrend or a downtrend, so the price does not have a clear-cut trend.
As a rule, during a neutral trend, traders, especially those who prefer the trend trading style, do not trade because the profit received due to price changes is minimal. However, flat trading is popular with traders who prefer channel trading strategies.
Trading in a sideways trend implies:
- buying at support lines,
- selling at resistance lines.
It should be taken into account that a break in the technical line can mean the beginning of a new price trend, so pending orders can also be used for trading:
- BuyStop - when the flat resistance line is broken,
- SellStop - when breaking the support line of the flat.
Stop loss orders should never be neglected, because price can make a false breakout and then return to a flat.
What indicators will help to identify a flat?
The best indicators of a flat are oscillatorswhose readings range from 0 to 100 and the median line.
Using indicators such as MACD or Stochastic, you can determine the peaks and troughs of a sideways trend, as well as the points where the flat ends.
