Range chart patterns will have a directional bias depending on the previous incoming trend.
Each chart pattern will have defining of the levels creating the pattern.
Whatever time frame you are trading this chart pattern, wait for a candle close outside of the trendline in the direction of the breakout candle. (Our time frame preference is the ).
Add indicator - is the amount of $ that went into a particular candle or in Forex the # of trades that took place.
Add ATR indicator - is the amount of price movement that occurred. Use the ATR to measure the price movement.
When you see descending bars and descending ATR line (which indicates ) this shows
a dis-interest in traders to invest in this pair creating consolidation which creates the chart pattern.
Trade Management after there is a breakout candle close.
1 - Position size (compare bar to ma line).
a - Breakout candle must be 100% of average for a full position size.
b - If 75% of average then ½ position size. (To find 75% of
look at the charts settings – divide smaller # into larger # = 75%+)
2 - Enter two trades.
3 - SL for both trades will be 1.5 x ATR.
4 - 1st trade TP will be 1 x ATR.
5 - No TP on 2nd trade – letting profit run and adjusting SL to follow price.
6 - When 1st TP hit – move 2nd trade SL to breakeven.
7 - Adjust the 2nd trade SL to follow price.
*8 – After Breakout candle – if price closes back into chart pattern close trade
*9 - When breakout candle is more than 1 ATR from breakout candle open.
a - Enter 1st trade at candle close with ½ position size.
b - Enter 2nd trade with a pending limit order that is 1 ATR of breakout candle open.
c – Price should pullback to that pending limit order for 2nd trade.
d – If Price returns back into chart pattern close trade before SL is hit.