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How Do You Know In Advance That The Market Moves Sideways?

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Looking at a chart, you always know in retrospect that prices moved sideways, but how to know in advance?


In the NeverLossTrading concept, we integrated a study, which measures changes in implied volatility and informs the trader by painting a "Purple Zone" on the chart, indicating, that the price/volume development of a share has reached this critical stage of consolidation. Then, we either apply short term sideways strategies, or wait for the breakout signal, to trade along with the direction after the breakout.

In the “Purple Zone”, we find little directional movement with various counter price trend activities until a breakout to the up- or downside occurs. To support the visibility of such price development, we shade the price chart for the time-period purple and produce a very powerful indicator, signifying:


  • Apply short term sideways strategies, with limited risk or do not to initiate trades when the Purple Zone continues, by not knowing when it ends and in which direction prices might breakout.
  • rend-trade when the Purple Zone is over, if the first candle outside the Purple Zone shows an arrow pointing to the trade direction:

o Purple Arrow: To the upside

o Purple Arrow: To the downside.


GE Breakout After a Purple Zone



At times we get asked why the zone is purple?


The answer is: It marks a time-zone of indecision where the market forces negotiate until an upside or downside price-move concludes the decision making process. The color purple is achieved by mixing red (down-color) and blue (up-color).


For the beginning financial market investor, the best is not to trade in the “Purple Zone”, but right after, when a trend is established.


More advanced traders gauge the price range in the zone and take trades already at the first break out. By being aware that even light-tower-candles that occur can quickly be reverted while the “Purple Zone Indicator” is present.


If we are in a trade that enters a “Direction Change Zone”, we either exit the trade or adjust the range for the stop not to be taken out by radical price movements. If we are unwilling to accept additional risk and still want to stay in the trade, the stop line (red line) of the Double-Decker at entry into the “Purple Zone” builds the point where we put our stop.


A directional arrow after the Purple Zone identifies a high probable trade entry.

If there is no arrow on the first candle after the Purple Zone, the study recommends not to enter into a directional trade.


The best trade entry for a trend trade is two ticks above/below the trade proposal painted on the chart.


The same functionality applies for Intra-Day- and Swing-Trading Charts. After our new software update, we are now allowing in the NLT-Purple-Zone-Indicator to put a computer generated price proposal at the end of the Purple Zone arrow:


SPY, ETF of S&P 500 Index Signifying the Overall Market Move



The trade direction-pointing arrow after the Purple Zone now resides on the price level of the cloud and identifies the new price direction to trade.


The width of the cloud can be adjusted from the factory setting of 2 to a higher or lower level:



If the level is set to zero, the Purple Zone Cloud disappears.


If it is set to 1, it narrows the width of the cloud.


A setting above 2 widens the cloud setting.


Further: The alert sound and the end of Purple Zone alert can be set to individual preferences.


Additional Switch Functions:

- If you want the computer generated trade proposal, set the switch on “Yes”.

- To receive a sound alert, when the End-of-Purple-Zone -Indicator is triggered, put the switch on “Yes”.


The “Purple Zone Indicator” is an integral part of our software package. See, how you can integrate it in your trading. We offer four mentorship programs, geared to the need of the individual Investor:


  • NLT Top-Line, for the Independent investor, where we install real-time analysis software.
  • NLT HF-Stock-Trading: For frequent traders, able to trade the markets every day.
  • NLT Wealth Building: If you are trading two times a week/month.
  • NLT Income Generating: For day-trading futures and options.

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@RoBik: You might want to read the article again. The moment a "Purple Zone" opens, you are aware of it as a trader and you can expect counter trade activities and staying out of a trade as long as the "Purple Zone" continues is a meaningful measure. The key is, we do not know for how many candles the "Purple Zone' will last, when the indicator triggers the sign of indecision, however, when the zone ends and specific conditions are met, you will receive a directional trade proposal, to trade along with.

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An answer to the OP: you don't, period. See The arrow of time.


I have to agree with RoBiK here. Hindsight is a funny thing. This is why I recommend counter-trend trading. By the time the market has gone in a particular direction, it is much more likely to head in the opposite direction. We just don't know when, so you have to stay with a series of trades until the reversal occurs.

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I have to agree with RoBiK here. Hindsight is a funny thing. This is why I recommend counter-trend trading. By the time the market has gone in a particular direction, it is much more likely to head in the opposite direction. We just don't know when, so you have to stay with a series of trades until the reversal occurs.


The Purple Zone is just one indicator in the NeverLossTrading concept and tells the trader that a time is reached where indecision increases the risk of trading. There are multiple other clearly spelled out trade entries and exits to share. When counter trend trading is a concept, which makes you successful, it would be interesting to read how you define, when a counter trend activity approaches. NeverLossTrading signals are taken from different measures, looking at momentum changes, price trend distribution, price-volume moves, volatility changes and I could go on and will be delighted reading how you measure that a counter trend trade activity is on the horizon and how you specify your trad entry and exit.

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