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 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: