The rectangle price pattern is built on the fundamental ability to identify support and resistance. In a constrained trading window, you can receive consistent returns from it. You should be able to recognize patterns and apply them efficiently when trading on Pocket Option with the assistance of this article.
What are rectangular value boxes?
A technical analysis tool called the Rectangular Price Box can be used to locate regions of support and resistance on a trading chart. They are made by tracing a rectangle across the price area for a specific amount of time on the trading chart. The rectangle’s top signifies the level of resistance, and its bottom shows the level of support.
A potential trading opportunity arises when price crosses through the resistance or support level of the rectangle price box. Using this information, traders can place trades in the breakout’s direction, buying if the price breaks through resistance or selling if the price breaks through support.
How to use the Rectangular Price Box Strategy on Pocket Option
To use the Rectangular Price Box strategy on Pocket Option, follow these steps:
Step 1: To trade an asset, open a trading chart for it.
Step 2: Seek out places where the cost has been rising steadily over time. A rectangular price box will appear on the chart to indicate these places.
Step 3: The region where the pricing range has been should be enclosed in a rectangle. The highest and lowest points the price should have touched should be at the top and bottom of the rectangle, respectively.
Step 4: Keep an eye out for a breakout of the price box’s rectangular support or resistance levels. If the price breaks the resistance level, that might be a buy indication; if it breaks the support level, that could be a sell signal.
Step 5: Place the trade with the appropriate Stop Loss and Take Profit levels in the breakout’s direction.
Benefits of using the rectangular price box strategy
There are many benefits to using the rectangular price box strategy on Pocket Option:
- Traders with all levels of experience can apply this straightforward, uncomplicated method.
- Traders may be able to use this to find probable locations of support and resistance and use those regions to place trades that have a better chance of success.
- It is applicable to a wide range of trading instruments, such as FX, equities, and commodities.
- It can be combined with other tools for technical analysis to improve the precision of trading signals.
Tips for using the rectangular price boxes strategy effectively
Here are some pointers for employing the rectangle pricing box technique on Pocket Option successfully:
- Use several time frames to verify that the rectangle pricing box is valid. The reliability of the support and resistance levels increases with the length of the time frame.
- Look for price boxes that are rectangular and taller than they are. This suggests a more significant region of support or opposition.
- To improve the precision of trading signals, combine the Rectangular Price Box technique with other technical analysis tools including trend lines, moving averages, and oscillators.
- To reduce losses and increase profits, use effective risk management strategies like Stop Loss and Take Profit.
How to recognize the rectangular price pattern
Let’s have a little discussion about the range market. Prices increasing up to a certain level before dropping to another level. The lower price acts as support, whereas the higher price establishes a level of resistance. They are so powerful that the price returns after hitting them without breaching any support or resistance levels.
Support and resistance are created by linking lines that are parallel to one another. A support line will be created by joining at least two bottoms. The resistance line will be joined to at least two vertices. The DAX chart for the previous 30 minutes is shown below.
Whenever a rectangle pattern appears, a trend is about to terminate. This suggests that the trend’s course has changed.
As a result, price consolidation usually occurs at the peak or trough of an upward or downward trend. And because the directional movement has ended, it is showing that the trend is set to change. Currently, there is no movement of the prices above or below a particular range.
What to do when a rectangular price pattern appears
The pattern of pricing boxes is generally simple once it emerges. But don’t panic. Before the new trend starts, you may still be able to profit from it.
You should first draw the lines of support and resistance. Watch for the times when the price crosses the lines. Open a buy position when the support line is crossed. If the resistance line is touched, open a sell position.
When trading short-term, we recommend using charts with larger time frames. Open a 5-minute trade, for example, the chart you are trading on is a 30-minute chart. This way, you can be sure that the price will stay within the rectangle and will not move up before the trade expires.
What to do when the price crosses the support or resistance level
When the price crosses over a support or resistance level, you need to be ready. It will eventually take place. Keep an eye on the price direction after the breakthrough and trade accordingly.
As illustrated in our example chart below, if the price crosses the resistance level, you should open a buy position because it denotes the beginning of an uptrend.
You may learn more about trading following a price breakthrough in this tutorial.
Throughout the time of the price box pattern, the price is prone to fluctuate within a particular range. When the price momentum is sufficiently strong, the barrier is eventually broken. There are some indicators that support this. Candles, for instance, are tall and the same color. As a result, it is reasonable for you to predict that the market will keep moving in the breakout direction.
You can place trades in response to the shifting trend by keeping everything said above in mind.
Now that you are aware of it, you can use the rectangle pricing pattern. Use a free demo account to get some practice in before moving to a real Pocket Option account. Always keep in mind that this strategy is not a foolproof formula. There is a potential that you could lose money when interacting with the financial market because risk cannot be entirely minimized.
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