Consolidations Patterns: how to trade

This is a brief introduction on how to trade on consolidation patterns.
When a market is described as “inconsolidation” the opposite characteristics are in place, relative to trending or breakout market (where price values are changing morerapidly).Next we will look at some market formations that show markets are in consolidation phases and then explain why these situations are best suited for trades that are within the “double no touch” variety.
Consolidation Patterns
Here, we will look at three common consolidation chart patterns that can be found when conducting technical analysis. The ability to identify these patterns: These patterns include:
Rectangles, Ascending Triangles and Descending Triangles.
Examples of the Rectangle Chart Pattern
When prices are caught in a rectangle, price values are usually seen bouncing between clearly defined support and resistance levels. Below is an example of this occurrence, using a 4 hour chart in Oil:
Consolidations Patterns: how to trade
From the chart, you can see that prices have attempted to overcome support and resistance levels in multiple occasions. In this case, we expect market participants to be experiencing indecision and that price values are not likely to change much in the coming time frames. So, how can this information be used to place trades?
Consider the following chart:
Rectangle Chart Pattern: how to trade
Since we expect prices to be trapped within this range of support and resistance, strike prices for double no touch options can be place just outside of these support and resistance levels. In this hypothetical example, these prices are shown in red, just outside the rectangle patter that is expected to contain prices going forward. With even the RSI in this example showing that prices are neither overbought nor oversold, there is little indication that prices will be able to move out of the rectangle.
The Ascending Triangle Pattern
Next, we look at the Ascending Triangle. This pattern is characterized by upward sloping trend line on the bottom side along with a flat resistance line on the top side. A visual example of this can be seen on the GBP/USD chart below:
How to trade with ascending triangle pattern
Of course, the ascending triangle is a consolidation pattern, which means that we are seeing market indecision and we are not expecting prices to move much from current levels.
How to trade with ascending triangle pattern
Since we do not expect prices to move much from current levels (given the consolidation pattern and the neutral RSI reading, we can place our strike prices just outside of the triangle area. Examples of potential strike prices can be seen in red for the chart above.
The Descending Triangle Pattern
Next, we look at the Descending Triangle. This pattern is characterized by downward sloping trend line on the top side along with a flat support line on the downside. A visual example of this can be seen on the Oil chart below:
How to trade with The Descending Triangle Pattern
The descending triangle is a consolidation pattern, which means that we are seeing market indecision and we are not expecting prices to move much from current levels.  
consolidation pattern and the neutral RSI
Since we do not expect prices to move much from current levels (given the consolidation pattern and the neutral RSI reading, we can place our strike prices just outside of the triangle area.




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