Life & Trading trader Denis Stukalin points out that price fluctuations and timeframes of sideways markets are related. He explains that the intensity of the price fluctuations directly impacts the duration of the price consolidation phase in the market after the breakout.
Understanding the Link Between Price Swings and Sideways Phases
A new piece by Denis Stukalin in Life & Trading offers some clarity on how price action and the length of a sideways market are connected. The trader notes that when an asset experiences intraday moves in the 1-3% range, it will typically settle into a sideways pattern for anywhere from three to six hours. In other words, dramatic volatility is not required for the market to consolidate for a few hours.
According to Stukalin, what matters most in forecasting how long such a lull will last is the size and timing of the original swing. His view is that the more pronounced the movement, the longer the market will take to find its footing and establish the conditions for a new trend.
Why Larger Moves Lead to Prolonged Consolidation
Stukalin’s analysis of higher timeframes reveals a pattern in traditional markets: once price action has moved 5-7% or more over a number of days, one can expect a period of sideways trading to follow for weeks. It is only natural that the market should require this additional time to equilibrate and absorb the volatility.
The situation is even more pronounced in the cryptocurrency space given its reputation for volatility. There, Stukalin observes assets making swings in the order of 10-30%. When crypto has shown such moves, it is not uncommon for the ensuing sideways phase to stretch out for several weeks while the market comes to terms with the magnitude of the move.
Practical Implications for Crypto Traders
Stukalin maintains that any trader would do well to understand the link between price volatility and how long a market stays in a sideways pattern. If one examines the magnitude of a given price move, it is possible to estimate the timeframe of the consolidation phase that will likely precede the next trend.
This is particularly relevant in crypto, where the market’s natural volatility leaves it open to both sharp swings and long stretches of calm. For the trader, being able to spot such behavior is an aid in calibrating strategy and managing risk, not to mention determining when to enter or exit a position with greater confidence.
Source — Денис Стукалин — Life & Trading: https://www.youtube.com/watch?v=JAea2OTIr-U