Bilateral/Consolidation Chart Patterns Commodity Trading

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

• Symmetric Triangles - Consolidation commodity trading chart patterns
• Rectangles - Range/ranging market

Consolidation Trading Patterns

Symmetrical triangles are commodities chart patterns with converging commodity 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 the apex of the triangle.

Commodity Trading Trend Lines can be drawn connecting the lows and 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 pattern. An early or late breakout is more prone to failure, and therefore less reliable. After a commodity price breakout the apex forms support and resistance levels for the commodity price. Commodity Trading 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 Commodity trades.

When these consolidation patterns form we say that the commodities 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 commodities 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 commodity chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we as commodity traders make sure we are on side that's winning?

Break out Downwards Sell Commodity Trading Signal after a Consolidation

Breakout Upwards Buy Commodity Trading 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 commodity price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If commodities price breaks out the upper line we buy, if it breaks out the lower line we sell.

Alternatively if you do not want to wait out the consolidation, you can use pending commodity orders. If you would like to know more about pending commodity orders go to the topic: Stop Entry Commodity Trading Order Types

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

• Buy Entry Stop An order to buy at a level above the commodities trading market commodity price.

• Sell Entry Stop An order to sell at a level below the commodities trading market commodity price.

These are commodity orders to buy above the commodities trading market or to sell below the commodities trading market.

Rectangle Trading Pattern

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

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

A breakout of commodity price action from this consolidation pattern forms when either of the horizontal line is penetrated & the trading range of this rectangle is broken. An upside breakout is a buy signal. A downside breakout is a sell signal.

Rectangle Pattern Commodities Trading - Consolidation Pattern

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