
Sideways Trend
A sideways trend is the horizontal price movement that occurs when the forces of supply and demand are nearly equal. If the price has regularly rebounded from support and resistance levels, traders may try to buy the security when the price is nearing support levels and sell when the price is nearing resistance levels. A sideways trend is the horizontal price movement of a stock between resistance and support levels that occurs when the forces of supply and demand are balanced. Traders can profit from sideways trends in several ways, from looking for confirmations of a breakout or breakdown to using stock options to placing stop-loss orders when the price nears resistance levels. In this case, traders may interpret the downward slope of the 200-day moving average as indicating a long-term downtrend, while the sideways 50-day moving average suggests that the intermediate term trend is sideways.

What is a Sideways Trend?
A sideways trend is the horizontal price movement that occurs when the forces of supply and demand are nearly equal. This typically occurs during a period of consolidation before the price continues a prior trend or reverses into a new trend.
A sideways price trend is also commonly known as a "horizontal trend."


Basics of Sideways Trend
Sideways trends are generally the result of a price traveling between strong levels of support and resistance. It is not uncommon to see a horizontal trend dominate the price action of a specific asset for a prolonged period before starting a new trend higher or lower. These periods of consolidation are often needed during prolonged trends, as it is nearly impossible for such large price moves to sustain themselves over the longer term.
Volume, which is an important trading indicator, mostly remains flat during a sideways trend because it is equally balanced between bulls and bears. It shoots up (or down) sharply in one direction, when a breakout (or breakdown) is expected to occur.
When analyzing sideways trends, traders should look at other technical indicators and chart patterns to provide an indicator of where the price may be headed and when a breakout or breakdown may be likely to occur.
Profiting from Sideways Trends
There are many different ways to profit from sideways trends depending on their characteristics. Typically, traders will look for confirmations of a breakout or breakdown in the form of either technical indicators or chart patterns, or seek to capitalize on the sideways price movement itself using a variety of different strategies.
Many traders focus on identifying horizontal price channels that contain a sideways trend. If the price has regularly rebounded from support and resistance levels, traders may try to buy the security when the price is nearing support levels and sell when the price is nearing resistance levels. Stop-loss levels may be put into place just above or below these levels in case a breakout occurs.
Advanced traders may also use stock options to profit from sideways price movements. For example, straddles and strangles can be used by options traders that predict that the price will remain within a certain range. However, it's important to note that these options may lose all of their value if the stock moves beyond these bounds, making the strategies riskier than buying and selling stock.
Example of a Sideways Trend
The chart below depicts a sideways trend, following a strong downtrend, that has lasted several months.
Image by Sabrina Jiang © Investopedia 2020
In this case, traders may interpret the downward slope of the 200-day moving average as indicating a long-term downtrend, while the sideways 50-day moving average suggests that the intermediate term trend is sideways. These trends could indicate that the stock is consolidating before resuming its downward trend or perhaps preparing to reverse into a bullish trend.
Related terms:
Breakdown
A breakdown is a downward move in a security's price, usually through an identified level of support, that portends further declines. read more
Breakout and Example
A breakout is the movement of the price of an asset through an identified level of support or resistance. Breakouts are used by some traders to signal a buying or selling opportunity. read more
Congestion
Congestion is a market situation where the demand to buy is evenly matched by seller's supply. This creates a narrow or congested trading range in the price. read more
Consolidation
Consolidation is a technical analysis term referring to security prices oscillating within a corridor and is generally interpreted as market indecisiveness. read more
Downtrend
A downtrend refers to the price action of a security that moves lower in price as it fluctuates over time. read more
Law of Supply & Demand
The law of supply and demand explains the interaction between the supply of and demand for a resource, and the effect on its price. read more
Moving Average (MA)
A moving average (MA) is a technical analysis indicator that helps smooth out price action by filtering out the “noise” from random price fluctuations. read more
Price Action and Explanation
Price action is the movement of a security's price over time, which forms the basis for a securities price chart and makes technical analysis possible. read more
Rectangle
A rectangle is a pattern that occurs on price charts. It shows the price is moving between defined support and resistance levels. read more
Resistance (Resistance Level) & Example
Resistance refers to a level that the price action of an asset has difficulty rising above over a specific period of time. read more