What is Consolidation?

Consolidation is a situation in the stock market where, for a certain period of time, the charts show indecision on the part of investors. During consolidation, prices remain in a similar range without crossing a certain support/resistance line. During consolidation, investing can be very risky.

 

When is consolidation interrupted?

During consolidation, the movements of investors are of great importance. At some point on the charts you may notice a sharp decline, which is called a false breakout, and this is taken as a sign of a continuation of the trend. Such violent moments can therefore be a manifestation that it is about to become clear what the trend will now be.

What markets are experiencing consolidation?

Such a situation, i.e., the continuation of the price at a similar level, can be seen on virtually every instrument, from the FOREX market to stocks to indexes.

When does consolidation occur?

The emergence of such a situation is not an accident. Consolidation is a signal that something important has happened. When there are large fluctuations, especially in FOREX markets, consolidation can be expected after a certain period of time, until a trend is formed. Another such moment will be a very important macroeconomic news, which will not clearly let investors know how to behave. Consolidation is also a situation that can be caused by investors themselves. If there is a lot of indecision, then changes occur quickly, making it impossible for investors to find a sign of which way the trend will go.

Is it worth investing during consolidation?

If an investor does not have enough experience in investing, then he should wait for the moment of consolidation for a trend to form. The money put into investments at such a moment can quickly be lost, and investing during a consolidation itself is called speculation by some, because you don’t know which way the charts will move.

Can you make money on consolidation?

During the consolidation itself, price fluctuation is frequent, so earnings are very uncertain. However, investors who anticipate market situations and predict the trend can just make money on their hunches.