When the market experiences a downturn in activity, the wise decision is to avoid entering trades or to reduce your trading activities temporarily. Many traders make the fatal mistake of continuing to trade without considering the current market conditions. There are times when the market moves slowly, with uncertain and unpredictable price movements, making effective trading difficult. These are the moments when traders often feel confused in identifying signals or even incur unnecessary losses. To avoid such difficult situations, let's further understand the characteristics of this dull market.
Identifying a Market with Flat Movements
When the market is in a trending condition, as seen in the image below, it's advisable to capitalize on trading opportunities. When a clear upward trend is evident with the formation of Higher High (HH) and Higher Low (HL) levels, it's an appropriate time to consider buying positions. Conversely, when prices start to weaken and test previously formed support levels, it's a suitable moment to consider selling positions. However, in a flat or choppy market condition, HH (Higher High) and HL (Higher Low) levels are not clearly visible. Price movements appear to be within a narrow range (sideways), but there isn't sufficient consistency in the formation of support and resistance levels. One way to recognize a choppy market is by using technical indicators. The chart below shows a choppy market condition characterized by flat movements on the EMA 8 and EMA 21 lines. Both indicator lines move parallel because prices lack a clear direction towards the EMA line. Although the market may be in a consolidation phase, the target price to be achieved is not clear.
Facing Uncertain Market Conditions
Dull market conditions can also occur when the market is sideways. When prices approach support and resistance levels with valid price action setup signals, it indicates that the market is moving within a range (sideways) and is still tradable. However, if price movements are inconsistent and far from the formed support and resistance levels, it indicates that the market is experiencing a choppy phase. In such conditions, it's advisable not to trade. Forcing yourself into trades when the market is choppy can be fatal. Support and resistance zones that usually serve as references for entering and exiting the market will not be clearly visible, making it difficult to achieve expected trading results. Instead, price uncertainty can trigger wrong decisions and lead to unnecessary losses.
Maintaining Balance in Trading
One of the key principles in trading is to maintain balance in your trading account. Many traders get caught up in using their margin to enter trades without considering the current market conditions. As a result, when real trading opportunities arise, their margin may have already been exhausted. These traders often worry about missing out on opportunities, so they trade in every market condition without considering the risks. However, according to experienced traders, market conditions always move in different cycles and not always in choppy or strongly trending conditions. If the market is currently choppy, it doesn't mean that this condition will last forever. Trading opportunities will always be there, so there's no need to worry about missing out and trading in every market condition. Instead, we need to be wise in determining the ideal market conditions for trading, so we can avoid unnecessary trading risks.
In conclusion, when the market is dull or choppy, it's wise to take a break from trading activities for a while. Pay close attention to market conditions and identify whether the market is trending, sideways, or choppy. Although it's still possible to trade in sideways conditions, it's advisable to avoid trading when the market is choppy. This will help you avoid unnecessary trading risks and maintain balance in your trading account. By acting wisely and only trading in ideal market conditions, you can increase your chances of success in trading.