Breakouts are a common occurrence in the stock market, and traders use rectangle chart patterns to identify them. In this article, we’ll show you how to use Quotex’s rectangle charting tool to identify breakout candidates.
What is a Rectangle Chart Pattern?
A rectangle is a chart pattern formed when the price is bounded by parallel support and resistance levels.
When the price breaks out of the rectangle, it is likely to continue moving higher. The breakout can be confirmed by watching the direction and magnitude of the movement.
The following tutorial will show you how to use rectangle chart patterns to trade breakouts in Quotex.
Rectangle chart pattern breakout trading overview.
Rectangle chart patterns can be used in a variety of ways, but one of the most popular uses is for trading breakouts.
When looking for a potential breakout, traders will want to find price areas that are bound by support and resistance levels.
These levels indicate where buyers and sellers are currently trading, and when either group becomes exhausted, prices will start to change.
To identify potential rectangle chart patterns, first, take a look at the price chart and identify any areas where buyers and sellers are trading together. These zones can be represented by parallel lines on the chart or by rectangle indicator in Quotex.
Once you have identified these zones, take a look at the volume data to see if there has been an increase in activity near these boundaries. If so, this may be an indication that a breakout is imminent.
To confirm that a breakout has occurred, you will need to watch the direction and magnitude of the movement of the price at either support or resistance zones. If the price moves higher above the resistance line, then that’s a breakout at resistance.
Likewise, if the price moves down below the support area then that’s a breakout at support.
Now that you know what support and resistance levels are and what breakouts are, let’s now look at case-specific scenarios of trading bullish and bearish rectangle patterns on Quotex.
A bearish rectangle is a technical pattern that can be used to predict future price movements in the downward direction.
The pattern consists of a series of peaks and valleys in a stock’s price chart, typically lasting for several seconds, minutes, days, or weeks depending on the time frame you are using to trade.
When the price of an asset falls below the lower boundary of the rectangle, it is considered to have broken out of the pattern.
When identifying a potential bearish rectangle, traders should look for patterns that include at least two peaks and two valleys.
Prices may also rise above the upper boundary of the rectangle before falling back below the lower boundary.
Generally speaking, breakouts from bearish rectangles are followed by short-term declines in stock prices.
As a trader in Quotex, you can use this information to make trading decisions based on your expectations for future market movements.
For example, if you believe that the market will drop following a breakout from a bearish rectangle, then you should short the market beforehand.
Bullish Rectangle Patterns are a great way to trade breakout assets upwards. Just like bearish rectangle patterns, bullish rectangle patterns consist of a rectangle with two sharp peaks on either side.
When the stock price breaks out of the rectangle, it is likely to continue moving higher. Bullish Rectangle Patterns can signal an upcoming trend continuation, so it is important to watch for them and trade accordingly.
The example below shows a Bullish Rectangle pattern. The stock price breaks out of the rectangle and starts moving higher.
More information about Bullish Rectangle Breakout Pattern.
The pattern consists of a rectangle formation with a resistance level and a support level. When the price breaks out of the rectangle, it is considered a breakout trade.
To correctly identify a bullish rectangle pattern, you need to first understand how to use trendlines or just pick the rectangle indicator on Quotex.
Should you choose to use trendlines, what are trendlines and how do they work?
Trendlines are lines that show the direction of the underlying trend when used in an uptrend or downtrend.
Trendlines can also be used on sideways trends to form channel, support, and resistance levels.
To create support and resistance levels with trendlines on Quotex, you need to find a strong uptrend followed by a range in price and draw a trendline connecting peaks and troughs in the areas you choose.
If you manage to mark those support and resistance levels then you should well have your rectangle.
Bullish Rectangle Patterns can be used to identify potential breakout opportunities in Quotex trading.
How to Trade Successfully with Bullish Rectangle Patterns in Quotex.
To use a Bullish Rectangle Pattern to trade breakout opportunities, you must wait for the price to finish consolidating and break past the resistance level as shown in the image below.
Once that happens, you can trade UP and hope to win in Quotex.
How to Add the Rectangle Pattern in Quotex.
In order to trade profitably with the rectangle pattern in Quotex, here’s what you must do.
Step 1: Login to your Quotex account.
Step 2: Add the indicator to your chart.
Next, you must identify the trend of the market.
Is the market trending upwards? You must wait for a consolidation zone in an uptrend to add the rectangle to your chart.
Remember, the rectangle must touch at least two peaks and two troughs to qualify support and resistance zones.
And, if the trend that you have identified is a downtrend, then you must find a consolidation zone on the downtrend and draw your rectangle there.
Once you draw the rectangle, either in an uptrend or downtrend, you must use the rules specified above for both bearish or bullish rectangle patterns to trade profitably on Quotex.
I hope this post has helped you learn how to trade on Quotex. This is a very simple strategy yet so effective and it can help you a great deal to win more.
Happy trading and if you don’t have an account in Quotex, register here.
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