In general, sideways markets emerge after periods of high volatility, as investors withdraw from risky investments and move into safer ones. A sideways market—or being within a range-bound trading pattern—occurs when a price remains relatively constant over an extended period of time with little movement up or down. If you are bullish, you believe that the price increase will continue. If you are bearish, you believe that the downward trend will continue. However, neither scenario appears likely to occur during sideways market conditions.

Identifying a sideways market, also called a range-bound market, involves observing price action that lacks a clear upward or downward trend. Key characteristics include price moving within a horizontal channel, with defined support (bottom) and resistance (top) levels.

1. Flat Moving Averages: When short- and long-term moving averages, such as the 20-day and 50-day, are relatively flat, it signals a lack of directional momentum.

2. Low Volatility: Price fluctuations are smaller, indicating indecision among market participants.

3. Oscillator Signals: Indicators like RSI or Stochastic oscillators repeatedly move between overbought and oversold levels.

4. Volume Analysis: Trading volume tends to decline compared to trending markets.

Sideways markets are ideal for range-trading strategies but less suitable for trend-following approaches.