What is Consolidation?
Consolidation
Forex Trading Glossary
Quick Answer: Consolidation is a sideways trading range where buyers and sellers balance out before the next directional move.
What is Consolidation?
Consolidation describes a period when price trades sideways in a defined range. It reflects market indecision and typically precedes a breakout that resumes the prior trend or reverses it.
Spotting Consolidation
- Flat moving averages: Trend indicators flatten during ranges.
- Lower volatility: Average true range contracts.
- Repeated tests: Price bounces between support and resistance.
- Volume decline: Participation slows until a catalyst appears.
Trade the Expansion
Plan entries in advance so you can act quickly when price closes outside the range on strong volume.
Strategies Around Consolidation
- Range trading: Buy support and sell resistance with tight stops.
- Breakout plays: Enter once price closes beyond the range and volume expands.
- News alignment: Watch for catalysts that could trigger the next move.
- Risk control: Avoid overtrading inside choppy ranges that erode focus.
Related Terms
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