Consolidation
What does it mean when a market stops trending and moves sideways, and how can that be spotted?
In plain words
A consolidation is a period when price trades inside a relatively narrow band, moving sideways instead of climbing or falling steadily. The highs and lows stay close together, and the price ends near where it began, showing that neither buyers nor sellers is in sustained control.
Why it matters
Consolidations often follow a large move and can mark a pause before the next directional leg. They also tend to come with lower volume and smaller hourly swings, which affects how a position sized during a trending week behaves once the market goes quiet.
In a real week: BTC, week of 1 October 2018
BTC's week of 1 October 2018 opened at 6626.57 and closed at 6615.26, a return of -0.17%, inside a range of 4.15% from the low of 6430.0 on Wednesday to the high of 6697.0 on Friday. Volume was below its prior 12-week average at 0.49 times, realised volatility was 22.3% a year, and the four prior weeks were mixed, with 2 up and 2 down. The close sat in the upper third of the range.
A common mistake
Treating a quiet week as a reversal. A sideways week can end in either direction; the pause itself says nothing about which way price will break.