How to Trade Breakouts Using Rectangle Chart Patterns

When the price is bordered by parallel support and resistance levels, a rectangle is produced on the chart.

A rectangle represents a moment of consolidation or hesitation between buyers and sellers as they trade punches but neither has the upper hand.

Before breaking out, the price will “test” the support and resistance levels multiple times.

The price may then move in the direction of the breakout, whether to the upside or to the downside.

The pair was clearly defined by two important price levels that are parallel to one another in the example above.

All we have to do now is wait for one of these levels to break and enjoy the trip!

When you see a rectangle, remember to THINK OUTSIDE THE BOX!

Rectangle with a Bearish Sign

During a decline, when the price consolidates for a while, it forms a bearish rectangle.

This occurs because sellers will likely crave to take a breather before lowering the pair any further.

Price in this case burst through the bottom of the rectangle chart pattern and continued to fall.

We could have made an enormous profit on this trade if we had placed a short order just below the support level.

Here's a suggestion:

When the pair breaks through the support, it usually makes a move that is roughly the size of the rectangular pattern.

The pair drifted beyond the objective in the example above, so there was a possibility to capture extra pips!

Rectangular Bullish

Another rectangle chart pattern, this time a bullish rectangle chart pattern.

The price stalled after an increase to consolidate for a while. Can you predict where the price will go next？

If you answered yes, you are right! Take a look at that fantastic upside breakout there!

After breaking over the top of the rectangular pattern, the price surged all the way up.

We may have profited from the trade if we had placed a long order on top of the resistance level!

When a pair breaks, it usually makes a move that is AT LEAST the size of its prior range, just like in the bearish rectangle pattern example.

Do I seem to be breaking out？