All language subtitles for 4. How to Trade Consolidations With Rectangle Patterns

Hello and welcome back to cryptocurrency trading masterclass by wealthy education.

In this video, we'll talk about trading consolidation's with rectangle patterns.

Now a rectangle is well, it's a rectangle.

It's pretty much what you would expect it to be.

It's basically an area of support and resistance that gets tested multiple times and then eventually

you make a move and it can be in either direction.

Typically consolidation leads to continuation, meaning that if you're in an uptrend, typically this

means that you will eventually break to the upside.

You cannot bank on it, though, and the best way to try these things is to look at it after the fact.

The great thing about it is that they have a built in measuring stick.

So say this is 20 dollars, it's supposed to be 20 dollars on a break above the high, a lot of times

people will wait to see some type of candlestick clothes outside of it.

That's really up to you, how you choose to enter.

You can be aggressive and do it right away as well.

But it's also more risky.

You could get a false breakout.

Meaning that they get through, but not enough to really get things going.

Typically, the stop loss is put somewhere right about in the middle of the box, maybe just a little

bit under giving you a built in one risk to to reward really straightforward.

You want to see support and resistance show up a couple of different times to form a rectangle in order

to trade it.

So here in a theory, I'm on the daily.

You can see that there is an area that the market had been struggling to get out of.

You can see we tested it at least three times before breaking out.

You can see that we tested the bottom three times, four times.

The nice thing about this is it's a continuation, so you would have put your stop loss somewhere in

the middle and you would have aimed for one hundred dollars, which you got in the very first day on

the breakout.

Furthermore, you can see that we came back to test this area, that's quite often the case, what was

once resistance becomes support and vice versa.

So if it was breaking down a lot of times, I'll come back and test it and continue forward because

it literally is just support or resistance.

So.

You can see that you had multiple ways to trade this, you could have taken the break out and taken

your profit, you could have taken the break out knowing that we had been rolling in.

This could be continuation and hold it until, you know, whatever your criteria the exit would be.

Or you could have entered based upon a retest of this area on this massive candlestick.

So you can see clearly areas to, you know, pay quite a bit of attention to due to the fact that we

had multiple ways to trade.

You can also make an argument for simply taking a look at this as a market that was messing around with

two major, big figures.

And then finally, you know, you you've got the.

Makdisi, you got.

Moving averages, they all could be telling you the same thing, you can see that we broke the zero

going into it, dipped and then crossed over right on the break out in the makdisi, took off.

So clearly plenty of reasons to to take this trade.

So Cordano did an almost identical thing on this daily chart.

You can see it was.

Right here, and this is why a lot of traders will actually wait for a close outside of this, a strong

close for that matter, because had you taken it the very first tick above, you may have gotten stopped

out.

So that is the difference between being aggressive and being conservative when it comes to these moves.

Either way, I mean, it really comes down to your risk to reward type of.

Strategy, but but clearly, this is a market that took off and took off hard to the upside.

So with that, I think what we're looking at here is the possibility that we could take indicator such

as?

Maybe the RSI.

Put that on the chart.

And you can see that we were overboard, so it's not a surprise that we kind of consolidated here and

once we broke out, we went parabolic.

Not a huge surprise.

You can also, you know, put the good old trusty.

FEMA here.

The daily chart, you could use the nine I like using a little bit higher numbers on.

Daily, Time-frame and the like, you can see it's held up quite nicely, Catano certainly made the

projected move and much further.

So cash, you can see this was a little bit different situation in the sense that it wasn't continuation.

It was a reversal.

But as I analyze this, you'll see why it wasn't really that big of a surprise, doesn't mean that you

knew right away that this was going to be the case.

But take a look at this area here.

At seventy seven dollars, it had been resistance multiple times.

So the fact that we came back up here and then got this nasty candlestick was a good sign that we were

going lower here on the for our Chernivtsi cash.

Take a look at the.

The.

And you can see that the makdisi right here, that's where we got the zero line cross and he didn't

get out until here if you're using the Makdisi.

Furthermore, you could also take a look at just the round figure itself.

You can see that seventy two has been in area 70, of course, is just below it.

So the fact that we broke below 70 also means something from a psychological standpoint.

You can see that we retested it the next candlestick.

So rectangles are pretty the relatively simple and because of this trader's love.

Trading them, and if you think about it, it's really not hard to understand why, because a rectangle

is simply, you know, it's one of the faces of the markets.

Markets are either trending or they're consolidating.

And then later on.

You might get something like a trend.

Consolidation where more people get involved in the trend.

But sooner or later, you get what they call distribution, those who got in early are giving it out

to they're trying to sell out of their positions and eventually they do.

And the lack of demand since this thing back down.

Same thing works in a downtrend.

There is something known as accumulation at the bottom.

And what happens is people are in there buying up.

In this case, it would be easy cash, maybe at a cheap price because they want longer term.

And then eventually he takes off and once you break out of that rectangle, the great thing about it

is it's a self-fulfilling prophecy.

There are stop loss orders just above like in this one.

So if it broke higher, all of these stop loss orders are forced to by the market.

It just pushes it higher if you break lower.

There are by orders that are down here and they have to protect them with stop losses, so eventually

you get to the point where they get blown out and they have to sell in order to cover their position

to get back to zero.

So it's a nice, nice, self-fulfilling, easily identifiable pattern.

And with all patterns, the higher the time frame, the more obvious, the more people are involved.

So then, of course, in and of itself means that you should be looking at higher time frames and then

drilling down.

And the next phase in the next video, we'll take a look at Trading Consolidation's with Bollinger bands.