(Ho Chi Minh City)
I don't know how to define "sideway" and in which strategies we can lay them into sideway. Thanks!
Comment on "Sideway Market”
TSO Reply: Hi Hung. When the market price is trading within a tight range of prices, it can be considered to be trading in a Sideway Market or Range-Bound Market.
In a sideway market, the stock price bounced up and down within a roughly parallel pivot point of support (on the low side) and resistance (on the high side). We are not expecting the stock price to explode with high volatility and trade outside the preferably clear level of support or resistance.
Such a market suggests that the bull and bears are fighting against each other with no clear side of winner. The general market usually spends a majority of its time in this condition.
The trading range between the support and resistance can be wide or narrow. As a general rule, the wider the trading range, the longer the price is staying within it. The narrower the trading range is, the easier the price is to break outside the upside or downside range.
Sideway market can be psychologically challenging to trade, especially for the inexperience trader. This is because there will be many anxious moment when the stock price is within the touching distance of pivot point. You never know whether the price will hold within the support and resistance this round.
Therefore it is best for the inexperience trader not to consider trading the uncap sideway strategies such as the Short Straddle or the Short Strangle strategy.
There are other Sideway Option Strategies that have limited risk that can be applied to a sideway market. This include the Long Call Butterfly or Long Iron Condor strategy.
There are various ways that an experience trader may trade the sideway market.
One of the ways is to wait for the trading range to be established. Then the trader will trade reversals right at the support or resistance level, once it is confirmed by the technical indicators that the market is on the oversold or overbought level.
As the general market spend most of its time trading within certain range, you need to develop your own trading strategies to make money from the sideway market.
Have many profitable trades ahead!