Abigail Doolittle | Aug 08, 2012 07:31AM ET
Returning to the unexciting and yet never-a-dull-moment sideways trend, it is advised, as has been noted before, by one of the defining texts on technical analysis named, aptly, Technical Analysis to sit on the sidelines of sideways trend trading and instead to wait for the break:
Trading within a range is difficult. Although many books suggest it as a strategy, it is almost impossible for the nonprofessional to profit through range trading. Thus, most traders stay away from trading within a trading range and instead wait for the inevitable breakout and beginning of a trend.
Relative to this year’s range on the S&P of 1267 to 1422, it is a rather wide range, and thus one that makes it more tempting than ever to try for its three major swipes up and down of about 10% and this seems particularly true of the move up off of the June lows.
Putting aside the fact that this two-month uptrend is comprised of 9 grinding whipsaws up or down of 5% or less for volatility that makes it unlikely that anyone but the inactive buy and hold investor captured the totality of the 11% move up, the technical “buy” signal within the sideways range – an early take on the directionless trading might break – did not come until Monday and a good reason to feel fine about avoiding temptation.
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
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