Have you ever wondered why does market exactly at support and resistance levels react and go sideways?
If you do not know what causes stock market to go sideways then I will be unveiling this secret to you.
What happens is at resistance level some traders assume market will break the resistance so they buy before the breakout occurs.
But, instead market takes resistance at that level and reverses, now these traders are stuck in a losing trade which they will be holding till the next support level break.
Now, when support level comes some novoice traders sell and take early entries in hope that market is going to give a breakdown and they do not wish to miss the move. So they sell before breakdown.
But, as expected market takes support there and reverses. These traders too now stuck in a losing trade that they will be holding till the resistance is break.
Now the market is rising and the traders who bought near resistance feeling relaxed and waiting to market come near resistance level where they entered so they can exit at breakeven or minimum loss.
Exactly when market tests support again, sellers square off their positions, which means they are placing buy orders which then again takes the market up. Similar reaction can be seen near resistance level.
This behavior repeats. This is how market goes sideways.