What Is a Sideway Market?
How to Draw the Range and Trade Breakouts

What is a sideway market?

A sideway market (also called a sideways or ranging market) is when price moves sideways instead of rising or falling steadily enough to form a trend. Price swings up and down between support and resistance.

Sideway conditions

Unlike an uptrend or a downtrend, a sideway market has no fixed rule. Compare it with the trend rules from EP1:

Uptrend Higher highs, higher lows

Downtrend Lower highs, lower lows

Sideway Neither of the two

!

If the chart meets neither the uptrend nor the downtrend conditions, treat it as a sideway market.

How to draw trendlines in a sideway

A sideway market usually looks like a rectangle or a triangle. Both work the same way: draw the range from the highs and lows.

Rectangle

Trendlines in a rectangle sideway

1

Find the highs and lows – where price has bounced several times at similar levels

2

Draw the lines – draw a trendline or a horizontal line through the highs and the lows

3

You have the range – (trendline X) the top of the range is resistance and the bottom is support

Triangle

Trendlines in a triangle sideway

1

Upper line – draw a trendline joining the lower highs

2

Lower line – draw a trendline joining the higher lows

3

You have the range – (trendline X) the range keeps narrowing

Method 1: Range trading

Use the top of the range as resistance and the bottom as support. Enter at one edge of the range and take profit at the other.

SELL

Price rises near the top

1

SELL – look for a SELL entry near the top of the range

2

Set your SL – just above the top of the range

3

Set your TP – take profit near the bottom of the range

BUY

Price falls near the bottom

1

BUY – look for a BUY entry near the bottom of the range

2

Set your SL – just below the bottom of the range

3

Set your TP – take profit near the top of the range

Range trading a triangle sideway

A triangle works the same way: SELL near the upper trendline and BUY near the lower trendline. But the range keeps narrowing, so your profit target gets shorter too.

Range trading on a real chart

Here gold (XAUUSD) is in a rectangle sideway. Drawing trendlines along the highs and lows gives the top and bottom of the range. When price rises near the top, you can look for a SELL entry and take profit near the bottom, with your SL just above the top.

Method 2: Breakout trading

A breakout is when price breaks out of the sideway range. It is often a sign that the market is starting a new trend.

SELL

Price breaks below the range

1

SELL – you can enter as soon as price breaks the bottom of the range

2

Set your SL – just above the top of the range

3

Wait for a retest – let price come back up to test the range for a better entry and a tighter SL

BUY

Price breaks above the range

1

BUY – you can enter as soon as price breaks the top of the range

2

Set your SL – just below the bottom of the range

3

Wait for a retest – let price come back down to test the range for a better entry and a tighter SL

Breakout trading a triangle sideway

A triangle works the same way. When price breaks the lower trendline, look to SELL. When it breaks the upper line, look to BUY. It is best to wait for price to retest the line before entering, for a tighter SL.

Breakout trading on a real chart

Here gold (XAUUSD) is in a rectangle sideway. When price breaks above the range, you can BUY right away (where the chart says Confirm), with your SL just below the bottom of the range.

To reduce risk, wait for price to come back and test the range. That gives the best entry because of the tighter SL (the box on the chart). After that, price makes a Higher Low (HL) and a Higher High (HH) and turns into an uptrend.

Summary: how to trade a sideway market

The key to trading a sideway market is to always draw the range correctly from the highs and lows first. Then choose whether to trade inside the range or wait for a breakout, and always place your stop loss outside the range.

FAQ about sideway markets