What Should You Do When the Market is Flat?

Trading business

Sooner or later every market turns flat, and it can feel strange not being able to find any good trading opportunities. In fact, many investors keep trying to find opportunities when the market is moving sideways, but that’s usually not advisable because a flat market can be unpredictable.

However, it does not mean that there is nothing you can do but rather the opposite. When the market flattens, you will have the opportunity to do all of those tasks you never get to do otherwise.

What Indicates a Slow Market?

Any given market can move in three directions; it either moves up, down or sideways and it’s the sideways market that’s often referred to as a flat market. The problem with a flat market is that it’s characterized by low volatility and as a trader, you want to be focusing on high volatility markets. Another problem with a flat market is that it can be very unpredictable and many times your regular trading strategies won’t work as efficiently which means the risk of you losing increases.

If you can’t trade when the market is flat, then what should you do?

Review Your Performance

As a professional trader, you should always strive to review and evaluate your past performances. You can either have a journal where you make notes of your trading while it happens, or you go back and look over your performance every once in a while. By doing so, you will be able to figure out which strategies have worked the best for you and which instruments you tend to make the most accurate analyses for. In turn, you can use that data to optimize your performance for the future.

Now, when the market is active and there is high volatility, you probably won’t have the time or incentive to do this which is why it’s perfect for the days or weeks when the market is moving sideways.

In other words, when the market stagnates and starts moving sideways, it’s time for you to start evaluating and optimizing your strategies based on past performances.

Investors Should Consider Trading

If you are a stock investor that mostly opens positions that stretch for long periods of time, a flat market could create some unique opportunities.

As mentioned, a flat market is far from optimal for trading purposes due to the low volatility, but there are exceptions. Even during the calmest circumstances, there are usually a few instruments that are moving, and you can always try to make a bit of profit from them.

For example, CFD trading is a great option for the long-term investor looking to benefit from smaller market movements during a flat market. CFD is short for contracts for difference and is usually offered by a broker.

Analyze the Market for the Future

A flat market will also give you plenty of time to perform in-depth analysis of instruments and markets so that you are well-prepared when the market takes off again.

We suggest you spend the time performing fundamental and technical analysis of the instruments you usually trade with. This will help you prepare for the next time the market starts moving, and it will also help you predict when that will happen.

A flat market is no excuse to not get stuff done but an opportunity to ensure that you are ready when the market starts moving again.

Final Thoughts

Don’t let the next flat market put you off balance and don’t see it as a waste of time where all you do is wait for the next move. Instead, try to make the best of it by optimizing your future performances and planning for the next time the market moves.

Flat markets happen, and there is nothing we can do to stop that so we might as well use them to our advantage.

 

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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