Trade Stock Indices

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Bilateral/Consolidation Stock Indexes Chart Patterns Indices Trading

With bilateral/consolidation stock indexes chart patterns the stock indexes trading market can move in any direction. There are two types of consolidation stock indexes chart patterns that form on indices charts:


  • Symmetric Triangles - Consolidation stock indexes chart patterns

  • Rectangles - Range/ranging market


Consolidation Indices Trading Chart Patterns

Symmetrical triangles are stock indexes chart patterns with converging indices 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 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 trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle stock indexes 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 stock indexes 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 stock indexes trading market cannot decide which way to move.

Bilateral Consolidation Indices Trading Chart Pattern on Indices Chart

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 stock indices 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?

Indices Downward Indices Price Action Breakout After Consolidation

Breakout Downwards Sell Indices Trading Signal after a Consolidation



Indices Price Action Upward Breakout After Consolidation

Breakout Upwards Buy Indices Trading Signal after a Consolidation


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Now back to our question, how do we make sure we are on the winning side?

Well we wait until stock indexes price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If stock indexes 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, you can use pending stock indices orders. If you would like to know more about pending indices orders go to the topic: Stop Entry Indices Trading Order Types


The two types of stop order types used to trade consolidation stock indexes chart patterns are:



  • Buy Entry Stop
    An order to buy at a level above the stock indexes trading market indices price.


  • Sell Entry Stop
    An order to sell at a level below the stock indexes trading market indices price.


These are stock indices orders to buy above the stock indexes trading market or to sell below the stock indexes trading market.


Rectangle Indices Trading Chart Pattern

A rectangle consolidation pattern is a trading range with narrow stock indexes price action that forms a consolidation phase in stock indexes market. The trading range is defined by two parallel indices trend lines which are horizontal and indicate the presence of support and resistance. This indices trading pattern is drawn on a stock indices chart using a rectangle, therefore its name rectangle stock indexes chart pattern.


For this consolidation stock indexes chart pattern, stock indexes price forms multiple highs and lows that can be connected with horizontal indices 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 stock indexes 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 signal. A downside breakout is a sell indices signal.

Rectangle Indices Trading Chart Pattern Breakout

Rectangle Pattern Stock Indexes - Consolidation Pattern



Indices Price Breaks the consolidation range after sometime and continues to move upwards after an upwards market breakout.

 

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