Bilateral/Consolidation Chart Patterns XAUUSD

With bilateral/consolidation chart patterns the xauusd market can move in any direction. There are two types of consolidation patterns that form on xauusd charts:

• Symmetric Triangles - Consolidation gold trading patterns
• Rectangles - Range/ranging market

Consolidation Chart Patterns

Symmetrical triangles are xauusd chart patterns with converging xauusd trend lines that form a consolidation period. The technical buy point from a symmetrical triangle is the upside break, while a downside break is a technical sell signal. Ideally, a market breaks out from a symmetrical triangle prior to reaching apex of the triangle.

XAUUSD Trendlines can be drawn connecting the lows and highs of the consolidation phase, the trend lines formed are symmetric and converge to form an apex. A breakout should occur somewhere between 60-80% into the triangle chart pattern. An early or late break out is more prone to failure, and therefore less reliable. After a gold price breakout the apex forms support and resistance levels for the gold price. XAUUSD Price that has broken out of the apex should not retrace past the apex. The apex is used as a stop loss setting area for the open XAUUSD trades.

When these consolidation patterns form we say that the gold market is taking a pause before deciding next direction to take.

These consolidation patterns form when there is a tug of war between the buyers and the sellers and the gold market can't decide which way to proceed.

Consolidation Chart Pattern

However, this pattern cannot go on forever and just like in a tug of war one side eventually wins, looking at the gold chart below see how the consolidation eventually had a breakout and moved in one direction. Now how do we as gold traders make sure that we are on the side that is winning?

Break Out Downwards Sell XAUUSD Signal after a Consolidation

Breakout Upward Buy XAUUSD Signal after a Consolidation

Now back to our question, how do we make sure we are on the side that's winning?

Well we wait until gold price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If gold price breaks the upper line we buy, if it breaks out the lower line we sell.

Alternatively if you don't want to wait out the consolidation, you can use pending xauusd orders. If you would like to know more about pending xauusd orders go to the topic: Stop Entry XAUUSD Order Types

The two types of stop order types used to trade consolidation trading patterns are:

• Buy Entry Stop An order to buy at a level above gold price.

• Sell Entry Stop An order to sell at a level below gold price.

These are xauusd orders to buy above the xauusd market or to sell below the gold trading market.

Rectangle Chart Pattern

A rectangle consolidation pattern is a trading range with narrow gold price action that forms a consolidation phase in xauusd trading market. The trading range is defined by 2 parallel xauusd trendlines which are horizontal and indicate the presence of support and resistance. This xauusd pattern is drawn on a xauusd trading chart using a rectangle, therefore, the name rectangle chart pattern.

For this consolidation chart pattern, gold price forms multiple highs and lows that can be connected with horizontal xauusd trendlines that are parallel to each other. This xauusd pattern forms over an extended period of time giving the pattern its rectangle shape.

A breakout of gold price action from this consolidation pattern occurs when either of the horizontal line is penetrated & the trading range of this rectangle is broken. An upside breakout is a buy signal. A downside breakout is a sell signal.

Rectangle Pattern XAUUSD Trading - Consolidation Pattern

XAUUSD Price Breaks the consolidation range after sometime & continues to move upwards after an upward market break out.