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A rectangle pattern is a technical analysis continuation price pattern that is used in cryptocurrency trading. The rectangle pattern is created when the price of an asset consolidates within a rectangular horizontal range after a period of market volatility. In this article, we are going to let you know what a rectange price pattern is, how to spot one, and how to use it to enter profitable trades.

What is a rectangle price pattern?

Example of a rectangle price pattern for technical analysis.
On the example above, you can see that the price goes up, befor a consolidation phase. The support and the resistance levels are parallel and form a rectangle.

Rectangle price patterns form when prices move within a constrained range for an extended period of time, after a strong up or down price movement. The best way to identify a rectangle price pattern is to look for two well-defined support and resistance levels. The support level is where buyers are stepping in to buy and support the asset’s price, while the resistance level is where sellers are putting up a strong fight to keep prices from moving higher. Rectangles are generally considered to be continuation patterns, meaning that they signal that the prior trend is likely to resume after the pattern completes. Once prices break above resistance, it confirms that the prior trend has resumed and traders can look to enter long positions.

How to trade with rectangle price patterns?

Rectangle price patterns are continuation patterns used in technical analysis to trade cryptocurrencies. They are typically used to trade breakouts of the rectangle.

To trade a cryptocurrency with a rectangle price pattern, wait for the price to break out of the rectangle. Once the breakout occurs, enter a long position if the breakout is bullish or a short position if the breakout is bearish. Place your stop loss just beyond the opposite side of the rectangle. Take your profits when the price reaches a distance equivalent to the height of the rectangle.

The picture above is drawn from Binance’s BTC/BUSD market. The candlestick chart displays 5-minute candles. You can see that a strong downtrend occurs, after which the price enters in a consolidation phase. It stabilizes within the constraints of the orange rectangle, the support and resistance levels respectively being the bottom and the top of the rectangle. The price breaks out from the support level, and the downtrend continues.