Bilateral/Consolidation Trading Chart Patterns Commodities

With bilateral/consolidation trading patterns the market can move in any direction. There are 2 different types of consolidation chart patterns that form on trading charts:

• Symmetric Triangles - Consolidation trading chart patterns
• Rectangles - Ranging market

Symmetrical Triangles Commodities Trading Pattern

Symmetrical triangles are chart patterns with converging trend lines which form a consolidation period. The buy signal from a symmetrical triangle 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 the apex of the triangle.

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 triangle pattern. An early or late breakout is more liable to fail, 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 triangle chart pattern shouldn't retrace past the apex point. The apex point is used as a stop loss order setting area for the open trades.

When these consolidation trading chart setupss form we say that the market is taking a break before deciding the next direction to take.

The consolidation chart patterns form when there is a tug of war between the buyers & the sellers & the market can not decide which side to move.

Consolidation Trading Setup

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

Breakout Downward Sell Signal after a Consolidation Setup

Breakout Upward Buy Signal after a Consolidation Setup

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

Well we wait until price goes past one of the lines & put buy or sell orders in that specific direction. After consolidation, If price breaks out the upper line buy, if it breaks out out the lower line we sell.

Alternatively if you do not want to wait out the consolidation chart setup, you can use pending orders. If you-wouldyou'd want to know more about pending orders go to the topic: Stop Entry Trading Order Types

The 2 types of stop order types used to trade consolidation patterns are:

• Buy Entry Stop An order to buy at a point above the price.

• Sell Entry Stop An order to sell at a point below the price.

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

Rectangle Commodity Trading Setup

A rectangle consolidation trading chart setup is a trading range with thin price action which forms a consolidation phase in trading market. The price range is defined by 2 parallel trend lines which are horizontal and indicate the presence of support and resistance. This commodity setup is plotted on a trading chart using a rectangle, therefore, the name rectangle trading pattern.

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

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

Rectangle Pattern Commodity Trading - Consolidation Pattern

Price Breaks the consolidation range after sometime & continues to move upward after an upward market breakout.