What is Consolidation in the Markets

If you want to start day trading you should learn more about consolidation areas and transitions. This is one of the basics.

So in today’s lesson, I’m going to explain them better. Technically, they are pretty much the same thing. We’re going to go more into exactly what they look like in the video.

Transition area

A transition area starts off as a consolidation and turns into a transition area because the market switches direction.

Consolidation area

A consolidation area simply as a slowdown as the market continues in the same direction.

So here we have a nice, strong movement upward and we have a consolidation area, a slow down (consolidation areas can also be called sideways movement).

Whenever we have this type of movement, we don’t know what’s happening in the live market, we’re just seeing that it’s a slowdown. So we wait.

It has a 50, 50 chance to go either up or down. So you never want to speculate or guess. This is a time when the buyers and the sellers are fighting it out. They’re deciding if the market is going to continue up or if the market is going to continue down. If it continues to set up, the buyers get out. If it starts if it changes direction and goes down, the sellers get out.

Bam, it goes down.

This consolidation area turned into a transition area. So here we have. A run down.

Since we want to work with the market as it moves in the correct direction. So we always want to have confirmation and know nowhere to go. This is why we wait.

Start Day Trading

If you want to learn more about my journey and how I started day trading you can read it here or you can watch on my YouTube channel.

If you want to start day trading with ease and confidence — Sign up for the FREE Mini Course.

So if you have any questions you can always ask me at traderchick.com and if you want to learn day trading basics — check out MY Courses.