What's Consolidation Chart Pattern in Forex?

How Do You Identify a Consolidation Trading Pattern in Forex ?

The Best Trading Patterns Tutorial for Beginner Traders - How to Identify and Trade Consolidation Chart Pattern

Chart Patterns for Day Trading - Trading Forex Patterns Cheat Sheet

This Consolidation trading patterns charts guide explains how to identify patterns - identifying chart patterns is the first step when it comes to learning how to trade with Consolidation chart patterns in Forex.

Consolidation forex price patterns commonly form on Forex charts and this chart pattern analysis guide explains how to trade & analyze forex charts using Consolidation forex trading chart patterns.

Consolidation Chart Patterns

Consolidation chart patterns are forex patterns with converging trend lines that form a price consolidation period. The technical buy point from a forex consolidation chart pattern 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 apex of the triangle.

Forex Trendlines can be drawn connecting the lows & 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 consolidation chart pattern - triangle pattern. An early or late break out is more prone to failure, and therefore less reliable. After a price breakout the apex forms support and resistance levels for the price. Price that has broken out of the apex should not retrace past the apex. The apex of the consolidation chart pattern is used as a stop loss setting area for open Forex trades.

When these consolidation patterns form we say that the forex market is taking a pause before deciding next direction to take.

These consolidation chart patterns form when there is a tug of war between the buyers & sellers and the market can't decide which way to continue.

Consolidation Chart Pattern - What is Consolidation Chart Pattern?

However, this consolidation chart pattern cannot go on forever & just like in a tug of war one side eventually wins, looking at forex chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we as forex traders make sure that we are on the winning side?

Breakout Downwards Sell Signal after a Consolidation Chart Pattern in Forex

Break-Out Upward Buy Signal after a Consolidation Chart Pattern in Forex

Now back to our question, how do we make sure we are on the winning side?

Well we wait until price moves past one of the lines of the consolidation chart pattern formation and put buy or sell orders in that direction. After consolidating, If price breaks 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 chart pattern, you can use pending orders. If you would like to know more about setting Forex pending orders go to the topic: Stop Entry Order Types

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

• Buy Entry Stop OrderAn order to buy at a level above the market price - above consolidation chart pattern.

• Sell Entry Stop OrderAn order to sell at a level below the market price - below consolidation chart pattern.

These are forex orders to buy above the market or to sell below the market.