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  1. Beginner
    Early Stages For Beginners
    8 Topics
  2. Forex Terminology
    11 Topics
  3. Margin & Leverage
    2 Topics
  4. Intermediate
    Identifying Scams
    2 Topics
  5. Brokers for Beginners
    5 Topics
  6. Technical Analysis
    13 Topics
  7. Advanced
    Using Indicators
    6 Topics
  8. Technical Analysis (Part 2)
    8 Topics
  9. Market Structure
    5 Topics
  10. Fundamental Analysis
    9 Topics
  11. Completion
    Risk Management for Beginners
    8 Topics
  12. Psychology for Beginners
    7 Topics
  13. Personal Psychology Questions
    2 Topics

Consolidation Trading

(Breakout, Retest, Continuation)

Consolidation is an area of traders’ indecisiveness between buyers and sellers in the market. You can find that price tends to consolidate at the end of a trend and can last hours, days, and weeks if it is awaiting major news to break out.

Waiting for price to breakout and retest consolidation is imperative because you don’t want to get trapped along with other buyers and sellers in the market. You want to wait for a strong push into one direction to break that area and a retest.

What some traders do once they see price coming back into that area for the retest, is automatically jump into the trade assuming price is going to return in the direction of the breakout. You must be careful not to jump the gun because it can sometimes be a fakeout and price can return back into consolidation and hit your stop loss. A patient trader will wait to enter after price passes the point it reached during the initial breakout.

In the illustration below, you will see why using a consolidation box can be beneficial in your entries. Here’s how:

Break Out, Retest, Continuation

Here is a different example of how to properly enter a trade once price breaks a key level:

Fakeouts-Entry

Even though it’s best to be patient, you may find traders who enjoy trading a sideways market. Often times these traders tend to scalp as price bounces back and forth between support and resistance. The important thing to remember is to pay attention to the charts when doing so, as price could very well breakout as previously shown.

Consolidation-Trading

If price closed higher than what it opened at, then it would be considered a blue or green bullish candle (or whatever color that describes going UP for you). If price closed lower than what it opened at, you will notice a red bearish candle.

Bullish-_-Bearish-Candles-example