How to Trade Breakouts in Stock Indices
With consolidation stock indices trading patterns the stock indices market can move in any direction after a indices price break-out. Consolidation stock indices patterns are used to spot break-out patterns in indices charts. There are two types of consolidation stock indices chart patterns that form on stock indices charts:
- Symmetric Triangles - Consolidation Patterns
- Rectangles - Range Indices Chart Patterns
How to Trade Break outs in Indices
Symmetrical triangles are stock indices chart patterns with converging trend-lines that form a indices price consolidation period that signals there is going to be a indices price breakout in one direction after this stock indices chart pattern breaks out in one direction. The buy stock indices signal from a symmetrical triangle is the upside stock indices price break, while a downside stock indices price break is a sell signal. Ideally, a the stock indices price breaks out from a consolidation stock indices chart pattern prior to reaching the apex of the triangle.
Indices Trend lines indices trend lines can be drawn connecting the lows & highs of the consolidation pattern for the indices price, the trend lines formed are symmetric and converge to form an apex - symmetric triangle pattern. A stock indices price break-out should occur somewhere between 60% - 80% into the triangle consolidation stock indices pattern. An early or late indices break out is more prone to indices whipsaws, and therefore less reliable. After a indices price breakout to one side the apex of the symmetric triangle forms the support and resistance levels for the indices price. Indices price that has broken out of the consolidation stock indices chart pattern should not retrace past the apex. The apex is used as a stop loss setting level for the open stock indices trades placed after a indices price break out.
When indices consolidation patterns form we say that the indices market is taking a pause before deciding the next direction to take - this also signals an impending stock indices price breakout - How to Trade Breakouts in Stock Indices - How Do I Identify Breakout Pattern? - Breakout Strategy Indices.
These indices consolidation patterns form when there is a tug of war between buyers and sellers and the indices market can't decide which way to continue.
Consolidation Stock Indices Patterns - How to Trade Breakouts in Stock Indices - How to Identify Breakout Pattern
However, this consolidation stock indices chart pattern cannot go on forever and just like in a tug of war one side eventually wins, the stock indices chart examples below shows how the consolidation stock indices chart pattern eventually had a indices price break out and moved in one direction.
How to Identify Break-out Pattern - Break-out Strategy Stock Indices - Breakout Trading Strategy Lesson - The Complete Break-out Trader Guide
How to Identify Break-out Pattern - Break-out Strategy Stock Indices - Breakout Trading Strategy Lesson - The Complete Break-out Trader Guide
After stock indices price consolidating, If stock indices price breaks-out the upper line we open buy indices trades, if stock indices price breaks-out the lower line we open sell stock indices trades.
How to Trade Break outs in Stock Indices
A rectangle consolidation stock indices pattern is a trading range with narrow stock indices price action that forms a consolidation period in stock index market. The indices trading range is defined by 2 parallel indices trend lines which are horizontal and these indicate the presence of support and resistance levels at this particular area. Rectangle consolidation stock indices chart pattern is drawn on a index chart trading using a rectangle, therefore thus its name indices rectangle stock indices trading chart pattern.
For this indices consolidation stock indices chart pattern, stock indices price forms a series of highs & lows that can be connected with horizontal indices trendlines which are parallel to each other. Rectangle consolidation stock indices chart pattern forms over an extended period of time giving this indices pattern its rectangle shape.
A indices breakout of stock indices price action from this rectangle consolidation stock indices chart pattern occurs when either of the horizontal line is penetrated and the indices trading range of this rectangle indices pattern is broken. An up side stock indices price breakout is a buy signal. A downside stock indices price break-out is a sell signal.
How to Trade Breakouts in Stock Indices - How Do I Identify Breakout Pattern? - Breakout Strategy Indices
Indices Price Breaks Out of the rectangle consolidation range after a period of time & stock indices price continues to move upward after an upward stock indices price break out.
How to Trade Breakouts in Stock Indices - Breakout Strategy Stock Indices - Breakout Trading Strategy Lesson - The Complete Break-out Trader Guide
