Sideways Movement

In the trading community, you may often hear terms like range, flat, sideways movement, or channel—these are all different names for the same pattern.

Sideways movement is a price range where the price is artificially held for the accumulation and/or distribution of a large player’s position.

Why does sideways movement occur?

To accumulate or distribute a large position, liquidity is needed. Most traders follow the classic technical analysis methods and base their strategy on opening positions at support and resistance levels. These levels contain significant liquidity, which large players need. Therefore, we can conclude that the formation of a sideways range occurs because it’s convenient and beneficial for large players.

Defining Sideways Movement

A sideways movement always forms after a strong directional move in one direction (upward or downward impulse).

• Upward movement: After an impulsive upward move, the first boundary of the range will be the high, and the second boundary will be the low formed later.
• Downward movement: After an impulsive downward move, the first boundary of the range will be the low, and the second boundary will be the high formed later.

To mark the range on the chart, you can use the Fibonacci retracement tool with settings at 0, 0.5, and 1.

Conditions for Formation

The price should react well to the 0.5 level, as this acts as an additional factor for determining the correct formation of the range. A good (correct) reaction to the 0.5 level confirms that the range boundaries have been accurately identified.

Deviation

Deviation refers to price movement aimed at taking external liquidity beyond the boundaries of the sideways range. As mentioned earlier, sideways ranges form to accumulate and/or distribute large market maker positions. This means understanding where and how they accumulate a sufficient position.

Classic technical analysis teaches that stop orders should be placed beyond local support and resistance levels, which are the boundaries of the range. For example, a retail trader sees that the price reacts at the resistance level, opens a short position, and places their stop order above that level. The opposite order for a short position is a buy. The more such orders, the better for the market maker (MM).

The price always moves from liquidity to liquidity. A deviation on one side leads to a deviation on the other side.
For instance, after the range forms, there is a deviation to the upside. One can assume that the price will soon reach the lower boundary to collect all the liquidity beneath it, as there’s no liquidity left above.

Once the range is formed, the price accumulates a lot of internal liquidity on both sides. The first liquidity collection occurs below, and as you can see, this led to a rapid price movement toward the upper boundary of the range to collect the liquidity above.

Trading within a Sideways Range

The principle of trading in a range is simple, which is why beginner traders like it so much. There are two main ways to open a position:

1. Aggressive approach – from deviations. This works on 1-minute ranges or lower time frames. As soon as the price moves beyond one of the boundaries, you open a position on the next candle in the direction of the price returning to the range. Expiration time is 3-5 minutes.
2. Conservative approach – wait for confirmation. Instead of immediately opening a position, you wait for one of the confirming factors, such as a structure break or trading with the local trend, or an order block that often forms. Then you open the position based on those confirmations. Expiration time is 3-5 minutes.