Rectangle Pattern

Learn to recognize and trade a rectangle pattern through interactive charts.

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What is a rectangle pattern?

A rectangle pattern is a consolidation pattern in a trend, which could be either up or down. This is why it's advisable to wait for a breakout to determine the direction of the next significant move in prices.

Interactive charts:

Download our free chart patterns PDF for a guide to 20 classical chart patterns with over 100 interactive charts, also on TradingView.com.

Rectangle pattern duration

A rectangle usually develops over a 3-month period, although some can take longer. The longer it takes for the pattern to form, the bigger the move you can expect in either direction.

Rectangle pattern characteristics

A rectangle consists of two parallel lines that define a trading range.

  1. This pattern is a consolidation in a trend, which could be either up or down.
  2. The parallel trendlines must run through at least 2 lows and at least 2 highs. The more touchpoints, the stronger the pattern.
  3. These highs and lows should alternate in a wave-like fashion, and be relatively evenly distanced from one another.

Trading volumes

Unlike triangles, flags or pennants, there is no expectation that volumes decline as the pattern forms. As always, look for a rise in volumes upon a breakout, in order to validate the pattern and the likely future price trend.

Rectangle pattern trading tips

A breakout occurs when the price either breaks through resistance, or falls through support. The breakout should occur on higher volumes. Some traders wait for a successful re-test of that line before opening a position.

In the event of a rise in price above the resistance line, this means waiting for resistance to become support. The opposite holds true in the event of a fall in price below support.


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