Flat market: to trade or not to trade?
First of all let us define what “Flat market” actually is. Flat market is a situation on a real market, when quotes of a certain asset move slowly without really rising up or falling down. Basically, when you see that quotes are barely moving, have no defined trend - that is a Flat market
Flat market can be predicted as well, sure. But let us weigh all pros and cons of a decision to trade such market.
We will observe what advantages trading a flat market has:
- Flat market can be seen quite often. That is great when a trader isn’t tied up by conditions of the market and can mount any!
- Quotes on a flat market quite often move in a well defined range of higher and lower levels. That kind of a behaviour can be predicted if the market is analysed correctly
- Such market condition can be used along with the Scalping strategy to increase your profit
- If you are a new trader, you should better avoid trading flat market. Thousands of traders know the feeling of losing your recently earned profit simply because they haven’t stopped trading after the market has lost the clear trend
- Even though sometimes a flat market can form a clear “channel” don’t make it fool you. There are a lot of false break-outs which are not easily detected
- On a smaller scale (1-2 hours) it may seem that market has acquired a clear trend. But in reality that is only a consolidation of the market, which is too unpredictable to trade.
- Taking into consideration a Risk management, it is better to avoid trading flat market according to most experienced traders.
On the other hand, there are some serious cons:
Finally, that might be tempting to start cherry-picking when others wait. But it is strongly recommended not to risk your own funds before you actually learn how to trade the flat market. From the experience of previous traders can be declared with much confidence that flat market should only be traded by professional traders. If you easily detect false break-outs, have mastered Support and Resistance level and Price Action is a best friend of yours, you can take over the flat market. But do not forget about the other side of that coin - risks are much higher during the flat market. Even if it seems like no clear trend at all, that is even more difficult to predict future behaviour of the market.