Bilateral/Consolidation Stock Indices Chart Patterns Indices Trading

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

• Symmetric Triangles - Consolidation stock indices trading patterns
• Rectangles - Range/ranging market

Consolidation Trading Patterns

Symmetrical triangles are stock indices 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 signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching apex of the triangle.

Indices Trend-lines can be drawn connecting the lows & highs of the consolidation phase, the trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle stock indices pattern. An early or late break out is more prone to failure, and therefore less reliable. After a indices trading price breakout the apex forms support and resistance levels for the indices trading 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 indices trading market is taking a break before deciding which is next direction to take.

These consolidation patterns form when there is a tug of war between the buyers and the sellers and the stock indices trading market can't decide which way to continue.

Consolidation 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 as indices traders make sure we are on side that is winning?

Breakout Downwards Sell Indices Signal after a Consolidation

Break-Out Upward Buy Indices Signal after a Consolidation

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

Well we wait until stock indices trading price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If stock indices price breaks out the upper line we buy, if it breaks out the lower line we sell.

Alternatively if you don't 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 Order Types

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

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

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

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

Rectangle Trading Pattern

A rectangle consolidation pattern is a trading range with narrow stock indices trading price action which forms a consolidation phase in stock index market. The trading range is defined by 2 parallel indices trendlines which are horizontal and indicate the presence of support and resistance. This indices pattern is drawn on a stock index chart using a rectangle, therefore thus its name rectangle stock indices trading pattern.

For this consolidation stock indices chart pattern, stock indices trading price forms multiple highs and lows that can be connected with horizontal indices trendlines which are parallel to each other. This indices pattern forms over an extended period of time giving the pattern its rectangle shape.

A breakout of stock indices trading 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 signal. A downside breakout is a sell indices trade signal.

Rectangle Pattern Stock Indices - Consolidation Pattern

Indices Price Breaks the consolidation range after sometime & continues to move upward after an upward market break out.