What does consolidation mean in trading?

Consolidation is a technical analysis term used to describe a stock's price movement within a given support and resistance range for a period of time. It is generally caused due to trader indecisiveness.

What does it mean if a stock is consolidated?

Consolidation is often considered by technical analysts and traders to mean indecision among the market participants. Since consolidating stocks typically trade within limited price ranges, they offer relatively few trading opportunities until the price breaks out of the consolidation.

What happens if you consolidate stocks?

Since consolidating stocks typically trade within limited price ranges, they offer relatively few trading opportunities until the price breaks out of the consolidation. The price, as you know moves in alternating cycles — uptrend, downtrend, and sideways — a consolidation may follow a downtrend or an uptrend.

What happens when the price breaks out of a trading consolidation?

When the price finally breaks out of the trading consolidation, there is often an increase in volume. In the forex market and other OTC financial instruments, you don’t have a centralized volume data, so it is difficult to use volume to analyze a consolidation and the subsequent breakout that occurs. Why do consolidations occur?