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.
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:
(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:
(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.