Bilateral/Consolidation Indices Trading Chart Patterns Indices Trading
With bilateral/consolidation indices trading chart patterns the indices trading market can move in any direction. There are two types of consolidation indices trading chart patterns that form on Indices trading charts:
- Symmetric Triangles - Consolidation indices trading chart patterns
- Rectangles - Range/ranging market
Symmetrical Triangles - Consolidation Indices Trading Chart Patterns
Symmetrical triangles are indices trading chart patterns with converging indices trading trend lines that form a consolidation period. The technical buy point from a symmetrical triangle is the upside break, while a downside break is a technical sell indices trading signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching the apex of the triangle.
Indices Trend lines can be drawn connecting the lows and highs of the consolidation phase, the indices trading trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle indices trading chart pattern. An early or late breakout is more prone to failure, and therefore less reliable. After a indices price breakout the apex forms support and resistance levels for the indices price. Indices Price that has broken out of the apex should not retrace past the apex. The apex is used as a stop loss setting area for the open Indices trades.
When these consolidation patterns form we say that the Indices trading market is taking a break before deciding the next direction to take.
These consolidation patterns form when there is a tug of war between the buyers and the sellers and the indices trading market cannot decide which way to move.
Consolidation Indices Trading Chart Pattern
However, this pattern cannot go on forever and just like in a tug of war one side eventually wins, looking at the indices trading chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we make sure we are on the winning side?
Breakout Downwards Sell Indices Trading Signal after a Consolidation
Breakout Upwards Buy Indices Trading Signal after a Consolidation
Now back to our question, how do we make sure we are on the winning side?
Well we wait until indices price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If indices price breaks the upper line we buy, if it breaks the lower line we sell.
Alternatively if you do not want to wait out the consolidation indices pattern, you can use pending indices trading orders. If you would like to know more about pending indices trading orders go to the topic: Stop Entry Indices Trading Order Types
The two types of stop order types used to trade consolidation indices trading chart patterns are:
- Buy Entry Stop
A indices trading order to buy at a level above the indices trading market indices price.
- Sell Entry Stop
A indices trading order to sell at a level below the indices trading market indices price.
These are indices trading orders to buy above the indices trading market or to sell below the indices trading market.
Rectangle Indices Trading Chart Pattern
A rectangle consolidation pattern is a trading range with narrow indices price action that forms a consolidation phase in Indices trading market. The trading range is defined by two parallel indices trading trend lines which are horizontal and indicate the presence of support and resistance. This indices trading pattern is drawn on a indices trading chart using a rectangle, therefore its name rectangle indices trading chart pattern.
For this consolidation indices trading chart pattern, indices price forms multiple highs and lows that can be connected with horizontal indices trading trend lines that are parallel to each other. This indices trading pattern forms over an extended period of time giving the pattern its rectangle shape.
A breakout of indices price action from this consolidation pattern occurs when either of the horizontal line is penetrated and the trading range of this rectangle is broken. An upside breakout is a buy indices trading signal. A downside breakout is a sell indices trading signal.
Rectangle Pattern Indices - Consolidation Pattern
Indices Price Breaks the consolidation range after sometime and continues to move upwards after an upwards market breakout.