Thursday, March 13, 2014

Trading with Rectangle Price Patterns;

In today’s video we discuss one of our favorite price patterns, which we see every day on any market and every time-frame, called ‘Rectangle Price Patterns.’ 

These patterns can guide us in taking some VERY high percentage trades and even guide us on a daily range and tell us where to look to get in and out for the most profit possible!

"Rectangle" patterns are continuation patterns showing indecision in trader's sentiment about bullish and bearish conditions.

"Rectangle" patterns are reliable patterns and the direction of the breakout follows the long-term-trend prior to the rectangle formation.

"Rectangle" formations are bound by two horizontal trend lines, where prices oscillate between the "highs" and "lows." The prices must intersect these trend lines at least twice before a breakout or breakdown can result.

The volume within the pattern is usually quiet and increases during the breakout attempt.

Trade It:
A trade setup occurs when a price closes outside the trend line after at least two penetrations on each side of the boundaries. Trades are entered on a follow-up bar at "high above the breakout bar or "low" below the breakdown bar.

Set your Profit Target:
Targets in "Rectangle" formations are based on the depth of the rectangle pattern. The pattern is reliable, and targets are usually set at 70 to 100% of the depth of rectangle from the trade entry.

Don’t forget to use a Stop-loss:
Rectangle patterns fail when prices retrace in to the middle of the rectangle channel. Place a "stop" order just below/above the middle of the channel.

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