{"id":5521,"date":"2020-09-03T19:55:56","date_gmt":"2020-09-03T16:55:56","guid":{"rendered":"https:\/\/roboforex.com/blog\/?p=5521"},"modified":"2026-05-26T10:57:27","modified_gmt":"2026-05-26T07:57:27","slug":"tech-analysis-patterns-how-to-trade-rectangles","status":"publish","type":"post","link":"https:\/\/roboforex.com/blog\/blog\/2020\/09\/03\/tech-analysis-patterns-how-to-trade-rectangles\/","title":{"rendered":"Tech Analysis Patterns: How to Trade Rectangles"},"content":{"rendered":"\n

In this overview, we will discuss trading the Rectangle pattern<\/strong>. This is a universal tech analysis<\/a> pattern that may be traded both individually and as a part of other patterns<\/a>.<\/p>\n\n\n\n

<\/span>How does a Rectangle form?<\/span><\/h2>\n\n\n\n

A Rectangle looks like a sideways channel, limited by the horizontal support and resistance levels<\/a>, where the price consolidates. The Rectangle is considered fully formed only after the price breaks away one of its borders. The goal of working off this pattern<\/a> is a movement of the price in the direction of the breakaway for the height of the Rectangle.<\/p>\n\n\n\n

Though the Rectangle is considered universal, some traders only trade it as a trend continuation pattern. This is because a relatively small Rectangle may often be a part of another TA pattern – the Flag<\/a>, which is, indeed, a trend continuation pattern.<\/p>\n\n\n\n

In this case, the formation of the Rectangle is preceded by a strong ascending or descending impulse. It stops, reaching a strong support\/resistance level, after which the price consolidates in a small horizontal range – a Rectangle forms. The most probable development of the situation is a breakaway of the Rectangle in the direction of the previous impulse and the continuation of the trend.<\/p>\n\n\n\n

Conversely, if the Rectangle is rather large, it is hardly connected to the previous price impulse and acts as an independent price pattern. In essence, this is a price movement in a sideways channel (flat)<\/a>, having clear upper and lower borders. In this case, the Rectangle becomes universal and may be traded either way in the direction of the breakaway.<\/p>\n\n\n\n

\"Rectangle<\/a>
Rectangle pattern<\/figcaption><\/figure>\n\n\n\n

<\/span>Do we trade inside the Rectangle?<\/span><\/h2>\n\n\n\n

There are different views upon trading inside the Rectangle. For example, famous traders Alexander Elder and John J. Murphy consider trading inside the Rectangle to be perfectly normal, while Jack D. Schwager advises against it.<\/p>\n\n\n\n

I suppose every pattern should be approached individually. If we see a rather small Rectangle after a strong impulse – better wait for a breakaway in the direction of the trend. Conversely, if the pattern looks like a large price range, you may easily trade bounces off its borders as you do in normal flats.<\/p>\n\n\n\n

Trading bounces off the borders of the Rectangle goes as follows:<\/p>\n\n\n\n