How Do You Read a Consolidation Pattern?

How Do You Trade a Consolidation Pattern?

Consolidation patterns - to trade consolidation patterns traders need to learn about consolidation pattern analysis.

How Do I Analyze a Consolidation Pattern?

Consolidation chart patterns are patterns with converging trend lines that form a price consolidation phase.

A buy signal from a consolidation chart pattern is the upside price breakout

A sell signal from a consolidation chart pattern is the downside price breakout.

Ideally, the price breaks out from the consolidation chart pattern prior to reaching the apex of this consolidation pattern which looks like a triangle.

Trend lines can be drawn connecting the price lows and price highs of the consolidation phase of the price, the trend lines formed are symmetric & converge to form an apex - this pattern resembles a triangle.

After a price breakout from the consolidation pattern - the apex forms support and resistance levels for the price. Price that has broken out of the apex of the consolidation chart pattern shouldn't retrace past the apex. The apex of the consolidation chart pattern is used as a stop loss order setting area for the open trades.

When consolidation patterns - traders say that the market is taking a break prior to deciding next direction to head.

Consolidation chart patterns form when there's a tug of war between the buyers & the sellers & the market cannot decide which direction to move.

How Do You Read a Consolidation Chart Setup?

However, when this consolidation chart pattern forms it cannot go on forever and eventually the price will break out to one side - from the chart examples below the consolidation pattern eventually had a price breakout & moved in one direction.

Consolidation Chart Setup Price Breakout Downwards

Consolidation Chart Setup Price Breakout Upward

How Do I Read a Consolidation Chart Setup?