What is market consolidation?

Breaking Down Its Impact On Your Portfolio Consolidation in the stock market is a phase in which a stock or index trades within a narrow range, meaning the price is moving sideways. Market consolidation is a relatively popular concept in many financial markets, from stocks to cryptocurrencies to commodities.

Are stock consolidations a good idea?

Stock consolidations are a normal aspect of trading the stock market and are a huge part of what keeps the market in balance. Generally, you can find charts to look for stock consolidations as you do some general research on stocks, or many of the top apps for stock trading will provide free stock charts to their customers.

What are stock consolidation patterns?

Stock consolidations are unique in thatthey must always come to an end. This leads to two types of consolidation patterns. There are breakout patterns where the stock may be experiencing a consolidation but are still trending slightly positively, in the direction of a breakout. There are usually the consolidations you want to try and trade.

What happens if a market breaks out during a period of consolidation?

A market’s price during a period of consolidation will still fluctuate, but it won’t break out of a certain price range. As soon as the market breaks out and moves either above or below the stagnant trading pattern, the period of consolidation ends. Sometimes a market’s trend will reverse after a continuation. This is known as a transition.