Bitcoin Consolidation Chart Patterns in Bitcoin Trading

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

• Symmetric Triangles - Consolidation chart patterns
• Rectangles - Range/ranging market

Symmetrical Triangles - Consolidation Chart Patterns

Symmetrical triangles chart patterns are commonly referred to as consolidation chart patterns.

Symmetrical triangles are chart patterns with converging 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 the apex of the triangle.

Bitcoin Price Trend lines 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 price breakout the apex forms support and resistance levels for the price. 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 Bitcoin trades.

When these consolidation patterns form we say that the Bitcoin market is taking a break before deciding the next direction to take.These consolidation patterns form when there is a tug of war between the buyers & the sellers and the market can't decide which way to proceed.

Consolidation Chart Pattern

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

Consolidation Pattern - Breakout Downwards - Sell Signal after a Consolidation

Consolidation Pattern - Breakout Upwards - Buy Signal after a Consolidation

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

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

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

The two types of stop orders used to trade Bitcoin consolidation chart patterns are:

Buy Entry StopAn order to buy at a level above the market price

Sell Entry StopAn order to sell at a level below the market price

These are orders to buy above the market or to sell below the market that are executed at a specified price below or above the current market price.

Rectangle BTCUSD Trading Chart Pattern

A rectangle consolidation chart pattern is a trading range with narrow price action which forms a consolidation phase in the Bitcoin prices market. The trading range is defined by 2 parallel trend lines which are horizontal - indicating the presence of support and resistance. This rectangle chart pattern is drawn on a chart using a rectangle, therefore its name rectangle chart pattern.

For this consolidation chart pattern - the prices form multiple highs and lows that can be connected with horizontal lines that are parallel to each other. This rectangle chart pattern forms over an extended period of time giving the pattern its rectangle shape.

A breakout of price action from this consolidation pattern forms 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 - Bitcoin Trading

Bitcoin price breaks the consolidation range after sometime and continues to move upwards after an upwards market price breakout.