Bilateral/Consolidation Stock Indices Chart Patterns Indices Trading

With bilateral/consolidation stock indices trading chart patterns the stock indices trading market can head 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 - Ranging market

Consolidation Setups

Symmetrical triangles are stock indices chart patterns with converging indices trendlines which form a consolidation phase. The technical buy point from a symmetric triangle is the upward break, while a downside break is a technical sell trading signal. Ideally, a market breaks out from a symmetric triangle prior to reaching apex of the triangle.

Indices Trend Lines can be plotted connecting the lows & highs of the trading consolidation setup, the trendlines formed are symmetrical & they converge to make an apex. A breakout should occur somewhere between 60-80% into the triangle stock indices pattern. An early or late break out is more liable to fail, and therefore less reliable. After a indices trading price break out the apex forms support and resistance zones for the indices trading price. Indices Price that has broken out of the consolidation pattern should not retrace past the apex point. The apex point is used as a stop loss order setting area for the open Indices trades.

When these consolidation setupss form we say that the stock indices trading market is taking a break before deciding which is next direction to take.

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

Consolidation Pattern

However, this trading setup can't go on forever & just like in a tug of war one side will eventually win, looking at the stock indices chart below see how the consolidation pattern eventually had a break-out and moved in one direction. Now how do we as indices traders make sure we are on side that is winning?

Break-out Downwards Sell Indices Signal after a Consolidation Chart Setup

Break Out Upward Buy Indices Signal after a Consolidation Chart Setup

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 goes past one of the lines & put buy or sell trade orders in that specific direction. After consolidating, If stock indices price breaks-out the upper line we buy, if it breaks out the lower line we open sell.

Alternatively if you do not want to wait out the consolidation, you can use pending stock indices orders. If you-wouldyou'd want to know more about pending indices orders go to the lesson: Stop Entry Indices Order Types

The two types of stop order types used to trade consolidation stock indices trading 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 Setup

A rectangle consolidation setup is a trading range with narrow stock indices trading price action which forms a consolidation phase in stock index market. The price range is defined by 2 parallel indices trendlines which are horizontal & indicate the presence of support and resistance. This indices pattern is plotted 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 & lows that can be joined with horizontal indices trendlines which are parallel to each other. This indices pattern forms over an extended period of time, giving the chart setup its rectangle shape.

A breakout of stock indices trading price action from this consolidation setup occurs when either of the horizontal line is penetrated & the price range of this rectangle is broken. An upside break out is a buy trading 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.