Trading Using Rectangle Pattern. Crypto Academy / S5W4 - Homework Post for @sachin08".
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INTRODUCTION
It was superb last edition but i think is getting better each week. This is really amazing this s5w4 again.
I can't do this home task without appreciating professor @sachin08 for a well packaged course.
I will be discussing rectangular pattern in trading.
QUESTION 1
- Explain Rectangle Pattern in your own word.
The rectangle is a sample that looks at the fee chart. A rectangle paperwork when fee touches the equal horizontal guide and resistance stage a couple of times. Price is restricted to transport between horizontal levels, growing a rectangle.
Like the triangle sample, the rectangle sample is likewise of important significance to traders. This sample is one wherein we will photograph as tunnel via which a railway is constructed into. When the educate movements into the tunnel it both descend or ascend which of path withinside the marketplace will carry new access opportunities.
Trading view.com
A rectangle is a technical evaluation sample made on a chart. The time period refers to an example wherein the charge of a safety is buying and selling inside a bounded variety wherein the degrees of resistance and help are parallel to every other, equivalent to the form of a rectangle.
In a rectangle pattern, traders will see the fee of the safety take a look at the stages of help and resistance numerous instances earlier than a breakout. Once the safety breaks out of the rectangle’s range, in both route, it's far taken into consideration to be trending withinside the route of the breakout. Not all breakouts grow to be being successful.
A Rectangle is a continuation sample that bureaucracy as a buying and selling variety for the duration of a pause withinside the trend. The sample is without problems identifiable through similar highs and similar lows. The highs and lows may be linked to shape parallel strains that make up the pinnacle and backside of a rectangle.
When the price hits the same horizontal support and resistance levels multiple times, a rectangle is formed. The price is limited by movement between two horizontal levels that form a rectangle.
The rectangle includes soils and price range at the graph.
This pattern consists of two horizontal trend lines. I marked the trend lines in red. One is the upper trend line and the other is the lower trend line.
QUESTION 2
How to identify Rectangles. Explain with Screenshots.
Rectangles in a chart are a bit difficult to identify. We normally achieve this by price trend or horizontal trend.
To understand the occurrences of triangle patterns, one has to be extra conscious with the support and resistance prices at an area that looks like a consolidation. The identification of triangle patterns can be noted from the following characteristics.
Price trend appear when traders buy and sell at certain levels, so prices fluctuate between these levels, creating a chart pattern. When the price finally breaks out of its price pattern, it could indicate a significant shift in sentiment.
PRICE TREND
The price trend seen in the triangle pattern is a form of consolidation. This means that prices trade between specific market intervals to form an upper identifiable by a single straight horizontal line representing resistance, while the lower end forms a price chain, forming support. If two or more of these prices support the trend line, this market position can be considered as building a triangle. The triangle pattern should win the hearts of traders when the price moves horizontally.
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In the screenshot above, you can see that the trend that should have occurred before the rectangular pattern was formed was bullish. So when you observe, you can see that the structure of the rectangular pattern simply zigzags when the price tries to rally and then goes down again. This means that both the resistance level and the support level have the same rate of rise and fall.
HORIZONTAL TRENDLINES
Here, the rectangle is easily identifiable when the price of the traded asset is simply in a bullish or bearish trend. With this trend, a rectangle is formed next to the trend. When the price rebounds and then rebounds at the same rate and in the same way. In the process of identifying a rectangular chart pattern, it would be wise to see where there is horizontal movement on the chart, so the price at this point should bounce between a resistance level (flat top) and support (flat bottom). It would be wise to know that these structures formed called the rectangle, as the price moves there should be space between them in a zig-zag form showing clearly the rise and fall of the asset price at these points in the chart.
QUESTION 3
Can we use indicators with this pattern to get accurate results? Explain with Screenshots.
It is always useful to use indicators that complement each other to improve the efficiency and success of trading. While using the rectangular pattern strategy, you can use the Momentum Oscillator to understand and help with entry points. This indicator, along with moving averages, improves decision-making accuracy.
The ability to combine the trading strategies you want to implement without perfect indicators for applying these strategies, I would say trades can succeed, but there may be shortages in areas that may not be visible, which will lead to trade failures. An indicator with a rectangular structure will definitely help. So, being able to read both indicators and asset price charts will help traders/investors to trade without much stress and will lead to successful trades.
Trading view.com
I will use the MACD indicator with a rectangular pattern to justify my argument as shown in the screenshot below. In the screenshot of the indicator, you can see more clearly the downtrend price of the asset is clearly and prominently in red and the short bar showing that the market is currently undergoing a downtrend. So, now that a rectangular structure is formed, you can see that the colors of the stripes on the indicator do not match. Some appear redder than others.
QUESTION 4
Explain Rectangle Tops and Rectangle Bottoms in your own words with Screenshots of both patterns.
The top and bottom of the rectangle are not just "square" metaphors, they are where the rectangle is formed. So it should not be confused with the top/bottom of the rectangle. The rectangle at the top means the rectangle formed at the top or bottom of the price movement. To help you understand, I'll explain the top and bottom of the rectangle separately.
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From the above screenshot we can see how the rectangle formed just after an upward movement (that is at the top of a bullish move)
In simple words, We can say that Rectangle Top is formed at the top of the trend. With the rectangle tops, the volume often recedes in the whole length of the rectangle.
Rectangle Bottom
A rectangular floor requires a rectangle to form on the existing bear market and the floor. We can simply say that the bottom of the square is formed at the bottom of the trend.
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From the above screenshot we can see a bear market before we had the rectangle at the bottom and just before the rectangle we have an undershoot.
QUESTION 5
Show full trade setup using this pattern for both trends. ( Entry Point, Take Profit, Stop Loss, Breakout)
Let's set up our trading routine on the chart with entry point, take profit, stop loss and breakout as shown in the picture below. This is simply done with the asset ETH/USD
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In the screenshot above, you can see that the rectangular structure formed simply touches the two horizontal lines so that the breakout on the price chart is simply a market entry point. Also, Take Profit is set above resistance and Stop Loss is set just below support.
Trading view.com
In the screenshot above, you can see that the formed rectangular pattern touches both horizontal lines formed. Breakpoints on the chart simply indicate the point of entry into the market. You can make a sell deal here or sell your holdings at that point. Also, Stop Loss is set slightly above resistance and Take Profit is set.
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CONCLUSION
The rectangle patterns like the previous triangles and flag patterns we studied with the professor@sachin08 are invaluable to any trader who understands the continuation or reversal of a trend during a particular “consolidation”
The application of these rectangular patterns and the suitable indicators will therefore aid in the successful trading of any asset. Hence these chart pattern can simply be found in the chart of the traded asset price.
The class was really awesome and well taken by the professor @sachin08
Regards From
@charis20