Bilateral/Consolidation Patterns Gold Trading

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

• Symmetric Triangles - Consolidation patterns
• Rectangles - Range market

Consolidation Trading Patterns

Symmetric triangles are chart patterns with converging trendlines which form a consolidation period. The technical buy signal from a symmetrical triangle is the upward break, while a downwards break is a trading sell trading signal. Ideally, a market breaks-out from a symmetrical triangle before to reaching apex of the triangle chart pattern.

Trend-Lines can be drawn by connecting the lows and highs of the consolidation phase, the trendlines formed are symmetric & they converge to form an apex. A break out should happen between 60% and 80% into the triangle chart pattern. An early or late break-out is more liable to fail, & thenceforth less reliable. After a price break-out the apex forms support & resistance levels for the price. Price that has broken out of the consolidation chart setup shouldn't retrace past the apex level. The apex level is used as a stop loss order setting area for the open trades.

When these consolidation chart patterns form we say that the market is taking a break prior to deciding next trend direction to move.

These consolidation chart patterns form when there's a tug of war between the buyers & the sellers & the market can't decide which side to move.

Consolidation Pattern

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

Breakout Downwards Sell Trade Signal after a Consolidation Pattern

Break Out Upwards Buy Trade Signal after a Consolidation Pattern

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

Well we wait til price goes past one of the lines & put buy or sell trade orders in that particular direction. After consolidating, If price breaks-out the upper line we buy, if it breaks-out out the lower line we open sell.

Alternatively if you do not want to wait out the consolidation pattern, you as a xauusd trader can use pending orders. If you would want to learn more about pending orders go to the lesson: Stop Entry Order Types

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

• Buy Entry Stop An order to open buy at a level above market price.

• Sell Entry Stop An order to sell at a level below market price.

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

Rectangle Trading Pattern

A rectangle consolidation chart pattern is a range with a thin price action that forms a consolidation period phase in market. The price range is defined by 2 parallel trendlines which are horizontal & show the presence of support & resistance. This pattern setup is plotted on a trading chart using a rectangle, hence, the name rectangle chart pattern.

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

A break out of price action from this consolidation chart pattern forms when either of the horizontal line is penetrated & the price range of the rectangle is broken. An upward break out is a buy signal. A down-ward break out is a sell signal.

Rectangle Pattern XAUUSD - Consolidation Pattern

Price Breaks the consolidation trading range after sometime & continues to move upward after an up-wardsupward market break out.

Learn More Tutorials & Courses:

• Day Gold Strategies Guide
• Gold Practice Trading on MT4 Gold Practice Account
• MT4 Copy Trade Software & MT5 Copy Trade Software
• How Do You Identify a XAUUSD Rectangle Consolidation Pattern in Gold?
• How Do You Download MT5 Trading Gold Platform for iPad?
• List of Best Technical XAU USD Indicators for Gold