The rectangle pattern is a trend continuation pattern. It is formed in trending markets where there is an impulse move followed by a range of price consolidation which makes the rectangle. Once the range breaks back into the direction of the trend you would look for a 100% extention of the first inpulse move.
Conventional way to trade a bullish Rectangle pattern:
-----Breakout----- (1) Wait for a clear rectangle to form. (2) Buy a break of previous high. (Top of rectangle) (3) Stop below the rectangles Low. (4) Target is a 100% extension of the first impulse move.
-----PullBack----- (1) Wait for a clear rectangle to form. (2) Wait for price to break and close above previous high. (3) Buy pullback at previous high. (Usually happens 1 candle after the break) (4) Stop below the rectangles Low. (5) Target is a 100% extension of the first impulse move.
Conventional way to trade a Bearish Rectangle pattern:
-----Breakout----- (1) Wait for a clear Rectangle Pattern to form. (2) Sell when price breaks the previous low. (Bottom of rectangle) (3) Stop above the Rectangles high. (4) Target is a 100% extension of the first impulse move.
-----PullBack----- (1) Wait for a clear Rectangle Pattern to form. (2) Wait for price to break and close below previous low. (3) Sell pullback at previous low. (Usually happens 1 candle after the break) (4) Stop below the rectangle Low. (5) Target is a 100% extension of the first impulse move.
Thanks for the post! That's a great pattern to trade!!
I'm looking for an indicator that can hopefully draw those "rectangles" ( or bounding boxes ) reasonably.. Surely not the most trivial thing to automated..
I'm looking for an indicator that can hopefully draw those "rectangles" ( or bounding boxes ) reasonably.. Surely not the most trivial thing to automated..
If you about something good let me know ( :