When we say that the price is in a consolidation on the chart, it means that the price is moving in a sideways range without a clear direction, whether up or down.
Characteristics of consolidation:
1. Fixed range:
The price moves between a support level (lowest point) and a resistance level (highest point).
2. Low momentum:
Strong price movement decreases, and the up or down trend temporarily stops.
3. Waiting for a breakout or penetration:
After a period of consolidation, a breakout (up) or breakdown (down) often occurs, leading to a new trend.
Reasons for consolidation:
Waiting for important economic news or data.
Balance between buyers and sellers.
A period of rest for the market after a strong movement.
How to benefit from it?
Monitor support and resistance levels to enter after the breakout.
Use indicators such as RSI or MACD to determine the upcoming momentum.
Practical example:
If the price moves between $100,000 and $99,000 for a period, the price can be considered to be in a consolidation state until it breaks this range.