How to trade price consolidations?

For most traders, trading the breakout is the only way to trade price consolidations. While trading breakouts can be fun because of the momentum associated with them, you may get many false breakouts before getting a real one.

What does consolidation mean in technical analysis?

Put another way, consolidation is used in technical analysis to describe the movement of a stock's price within a well-defined pattern of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset moves above or below the prices in the trading pattern.

What is a consolidation period?

Consolidated stocks typically trade within limited price ranges and offer relatively few trading opportunities until another pattern emerges. Technical analysts and traders regard consolidation periods as indecisive and cautious. 1 Stocks under consolidation trade in a limited range.

What is a stock consolidation?

To put it simply, a consolidation can be a trend continuation formation or a trend reversal formation. Typically, when a stock is consolidating, its price movement stays within two established boundaries. These boundaries can take any shape and may be well-spaced or very narrow (tight consolidation), depending on the market volatility.