How to Trade Breakouts in XAUUSD Trading
With consolidation trading patterns the market can go in any direction after a price breakout. Consolidation patterns are used to spot break out patterns in charts. There are 2 types of consolidation patterns that form on charts:
- Symmetric Triangles Patterns - Consolidation Patterns
- Rectangles - Range Chart Patterns
Consolidation Chart Patterns
Symmetrical triangles are patterns with converging trendlines that form a price consolidation period that signals there's going to be a price break out in one direction after this pattern breaks out in one direction. The buy signal from a consolidation triangle pattern is the upside price break out, while a down-side price break out is a sell signal. Ideally, a the price breaks-out from a consolidation pattern prior to reaching the apex of the triangle.
Trend lines trend lines can be plotted by connecting the lows and highs of the consolidation pattern for the price, the trend lines formed are symmetric & converge to form an apex of a triangle - consolidation triangle pattern. A price break out should occur somewhere between 60 % and 80% into the triangle consolidation setup. An early or late xauusd trading break out is more prone to xauusd whipsaws, and therefore less reliable. After a price break out to one side the apex of the consolidation triangle chart pattern forms the support & resistance zones for the price. Price that has broken out of the consolidation pattern should not retrace past the apex. The apex is used as a stoploss setting level for the open trade transactions set after a price break out.
When consolidation patterns form we it signals an impending price break out once price breakout and moves out of this consolidation chart pattern - How to Trade Breakouts in XAUUSD - XAUUSD Breakout Strategy XAUUSD.
The consolidation patterns form when there is a tug of war between buyers & sellers & the market can't decide which way to proceed.
Consolidation Patterns - How to Trade Breakouts in XAUUSD Trading
However, this consolidation setup cannot go on forever - the chart example below displays how the consolidation pattern eventually had a price breakout and moved in one direction.
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After price consolidating, If price breaks out the upper line this is a buy signal, if price breaks the lower line this is a sell signal.
How to Trade Breakouts in XAUUSD Trading
A rectangle consolidation chart pattern is a trading range with thin price action that develops into a consolidation phase in xauusd trading market. The range is defined by two parallel xauusd trend lines which are horizontal & these indicate the presence of support zones & resistance levels at this particular area. Rectangle consolidation chart pattern is drawn on a chart using a rectangle, therefore, the name xauusd trading rectangle trading pattern.
For this consolidation trading pattern, price forms a series of highs and lows that can be connected with horizontal xauusd trend lines that are parallel to each other. Rectangle consolidation setup forms over an extended period of time giving this setup its rectangle shape.
A xauusd break out of price action from the rectangle consolidation pattern forms when either of the horizontal line is penetrated & the range of this rectangle setup is broken. An upside price break out is a buy signal. A downside price break out is a sell trading signal.
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Price BreaksOut of rectangle consolidation range after a period of time & price continues to move up-ward after an upwards price break out.
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