DEFINITION of Slow Market

A slow market is a market with low trading volumes and/or low volatility, or a market in which trade orders are not being filled as fast as possible. It may also be used to describe a market with few initial public offerings or secondary offerings in the stock market, or new issuance in the corporate bond market.

BREAKING DOWN Slow Market

Traders who thrive on volatility and volume, like market makers, high-frequency traders and momentum traders, hate slow markets that are trading sideways, instead of trending or moving between defined support and resistance in wide range-bound markets. It is hard to make money when the market is not moving in any real direction at all, and gets stuck within relatively narrow trading ranges.

Slow, or flat, markets present an additional roadblock for momentum strategies because they rely on buying breakouts and selling breakdowns. Trading ranges upset this approach, with attempts to push above resistance or drop below support typically attracting reversals that can punish new positions with sudden losses.

Momentum traders will often reduce their trading frequency and position size during slow markets, and they will look for securities or sectors in slow markets that still exhibit strongly trending action that diverges from range-bound indices.

Slow markets often occur in environments in which there is little news flow to trigger market moves, or after big market moves, when they are often described as being in a tight consolidation range. Markets can spend long periods grinding sideways, consolidating past trends while lowering volatility levels.