Consolidation (accumulation / sideways price zone) is a condition that makes it difficult for the market to easily destroy a lot of Traders. These cumulative price zones often appear after trends, trend-trading traders often throw away all the profits earned on the previous trend at this stage because they constantly encounter false signals.

From traders who use indicators as moving averages, to resistance-support, to supply-demand ... all fall in the trap and suffer significant losses. This topic will cover in-depth what is related to the cumulative price zone, providing you with a deeper understanding of these market conditions from which to make more accurate decisions.

Cumulative price zones - the causes of their formation

The accumulation zone is mainly caused by professional Traders who take profits.

Their take-profit action prevented a further movement of the trend by consuming all the new orders opened following the trend of small traders who often entered the market when they reached the top/bottom.

This profit-taking has produced deep pullbacks while also marking the first phase of the price zone accumulation. When the trend structure is broken with this pullback, the Trader should mark the newly created high (for a downtrend) or low (for an uptrend) price (hereinafter: first structure) as a resistance level. potential support/resistance. And if the market creates a real consolidation, it is very likely that the price will bounce back at this level.

In the example above, the price action has very well descriptive. In the first profit-taking phase at the first peak, the buying power in the market was still abundant, so the decline was stopped, then at the second peak the price collapsed very quickly, the buyers in this area lost their clear advantage. , the price cannot create a higher-high but instead is a lower-low, breaking the trend structure of the market. The prices then bounced back at this support level twice and formed a true consolidation.

The next example of a price rebound at first consolidation.

Two-channel banks of the cumulative price zone

Any cumulative price zone has two-channel banks, representing the level of resistance-support that price will fluctuate within for a given period of time.

The upper channel bank is where the sellers wait to push the price down each time the price approaches this zone, while the lower channel bank is a set of buy pending orders ready to counterattack.

How to trade in the cumulative price range?

Most of the trading methods you find online are not suitable for accumulation price zones (quote: author).

Reversing trading strategies such as supply-demand is very detrimental under these market conditions. For example, traders who trade this type often see demand zones as a place where the market is likely to turn around, they only pay attention to this demand zone, ignoring the possible rebound at the upper resistance. In short, they usually trade in the middle of the cumulative price zone rather than the polar area, and this is completely out of favor with their account.

Increase probabilities when trading the cumulative price zone

The first job is to mark the potential resistance-support level of the cumulative price zone, as these are the price zones that are noticed by the pro-traders and the price is most likely to bounce back in these areas.

You need to divide the consolidation region into 3 areas: the middle area and the two boundary regions. When the price moves to the upper area, you should only consider short orders and vice versa.

The question is: At an early stage how can you be sure this is the accumulation area that applies these rules? There is no certainty at all, however, using price action techniques to determine market conditions (e.g. low peaks) while trading alongside the direction of the previous trend can help you. believe more.

Sometimes there will be a mix of accumulation price zones like the example below, and it is up to you to decide to trade with this smaller accumulation zone.

What should be noted here is the magnitude of this small cumulative price range; and their difficulty also often increases since internal resistance-support levels can be easily broken to reach external resistance-support, they can happen at any time.