A bullish rectangle pattern is considered one of the most important patterns that occur at the time when prices get paused and a time of uptrend. In other words, in the bullish rectangle patterns, the price moves sideways. Similarly, price movements also start in the range on the candlestick chart along with a bullish breakout.
It’s a chart pattern that swings in both ways which mean this chart pattern act as both a continuation and trend reversal pattern. You may hear about bullish rectangle patterns because most retail traders are used to this because of their massive winning ratio.
But you might be confused about how to find and trade a bullish rectangle pattern. In this post, you’re going to learn entirely about each and everything.
Read more: 4 best bullish candlestick patterns
How do I identify a rectangle chart pattern?
Identification of a rectangle chart pattern isn’t challenging. In other words, this pattern is used to identify the condition or situation of the market. To give you the essential identification that is in a rectangle chart pattern price moves sideways. Back to the business, if you want to identify a rectangle chart pattern, then you’ve to see the two comparable highs and two lows.
In words, the market moves within a price range and time, forming a rectangle in the chart. For better identification, you’ve to follow this step along with the previous one. You’ve to keep in mind two price touches on the resistance zone, and another two are available on the support zone.
Break out with a bullish candlestick
You need to take care of this critical step because it’s essential. In other words, a significant breakout is incomplete without having a bullish candlestick. The reason behind that is that a valid flight couldn’t happen without him.
Similarly, the body-to-wick ratio is the high of all the bullish candlesticks. Small breakout candlestick shaped and be on the waiting list before the breakout confirmation with a big candlestick. You may know small candlestick has low momentum, and the possibility of a breakout is with high momentum candlestick. All this happens within a bullish rectangle pattern in a particular order.
Two main types of the bullish rectangles patterns
- Trend reversal rectangle pattern
- Trend continuation rectangle pattern
The trend reversal case is a little bit different because bullish rectangle patterns are shaped ensuring the bearish market. The reason behind that is whenever a bearish market is pushed down by the sellers, then bullish rectangle patterns form, and that’s a point where a new bullish trend will begin.
In comparison with others, this pattern is considered very hot and violen, leading to big losses in potential trading. This is used most of the time for forecast analysis.
What signs do bullish rectangle patterns show the traders in trading?
The rectangle chart pattern isn’t just for regular use for traders but indicates an indecision symbol. In general, the trade of a bullish rectangle pattern is entire to the point and straightforward. Because this matters for the future, they decide which direction they want to go.
In other words, they have complete control to start a bullish or bearish trend. That’s not all. It also depends on the breakout of the rectangle pattern, whenever you decide to continue trading with a bullish trend, you’ll Start implementing the trading strategy.
Another scenario that comes into play is that when the price moves in sideways, the potential buyers have the same amount of power compared to sellers. In other words, that’s the reason why price moves out in a range. Similarly, whenever bullish breakout forms, then rectangle patterns, a resistance zone happens, and that’s where a bullish rectangle pattern is shaped.
But the completion of bullish rectangle patterns is only possible after the flight of the resistance zone. There are many other things that happen with the price, but only a breakout confirms the market’s future direction.
Also read: Bullish Continuation Patterns – Complete Guide
Day trading strategy with a rectangle pattern?
Day trading strategy is very effective for traders that will help you to take your profit to the next level. In other words, it will help you minimize the losses because it has three technical parameters. Once we add these three technical parameters to the rectangle pattern, the probability of winning increases. Here are a number of different confluences that will help you gain profit and secure from losses.
- Once the breakout starts in the upper resistance zone of the rectangle pattern, all that is possible is with a big bullish candlestick. That shows the price will break the site at its full peak.
- The primary prior trend ahead of the bullish rectangle pattern is considered bullish because that indicates the continuation chart pattern.
- If you feel the breakout is completed now, wait for the price to retrace the 38 Fibonacci levels.
You can also try these three confluences that will help you in a proper trade setup in the market. Here are the top three confluences to follow.
Buy an entry
You need to follow a straightforward process to get the best results. In simple words,, start with opening a buy order when the price retraces the 38 Fibonacci level, and the resistance zone breaks out. That’s how you can complete this procedure of buying an entry.
Stop the loss
Stop the loss is also a concise and straightforward procedure. You need to be placed below the low of the bullish rectangle pattern then you’re done with the process of stop loss.
Take profit level
Last but one of the most effective confluences that you need to use. The direct distance between the support and resistance is the take-profit level. Similarly, the next step is projecting above the resistance zone of the bullish rectangle pattern.
Final thoughts
A bullish rectangle pattern is also famous as a bullish channel pattern. It’s a good chart pattern, and a trading, continuation pattern like that will help you achieve high-level results. Some so-called intelligent traders trade against the market, but in the end, they’ll lose their whole balance. Technical tools are always helpful for creating and implementing a winning strategy. You can also use this day trading strategy to get benefits with your trades.
FAQs (Frequently Ask Questions)
Which rectangular pattern is more useful for traders?
Whenever you follow the trends with a winning trading setup, the chances of making a profit will increase. In comparison between the bullish and bearish patterns, most of the time, bullish patterns are considered valuable. Because bullish patterns had a high winning probability when we shape this with a bullish trend.
Does the rectangular pattern bullish or bearish?
A lot of people are got confused about whether the question rectangular pattern is bullish or bearish. But the answer is simple the rectangular design isn’t in any of them because it’s used to indicate indecision in the market. In other words, bullish or bearish patterns matter when the price breaks this pattern.
What does a bullish rectangular pattern mean?
Bullish rectangular patterns show price pauses before it trades on the same side as the previous trend. Now it’s the time when markets expected to take this trade higher. The other primary purpose of this trend it provides the signs an endless war between buyers and sellers is going to be over.
