Rectangle Patterns

Rectangle Pattern on GBPCHF

Rectangle Pattern on GBPCHF

Rectangle Pattern on GBPCHF is one of the most interesting classical chart patterns from this period of time. Because it is a pattern developed in the continuation of the head and shoulders pattern on GBPCHF.

The premise

Let’s take a look at the daily chart of the GBPCHF currency pair. We’ll see that there is a head and shoulders pattern right in the resistance from the left. Moreover, after the price broke the SHS pattern it simply evolved into a rectangle. It is this rectangle which provides us a new trade opportunity.

How did I trade the rectangle pattern on GBPCHF

Considering that this rectangle pattern has a clear support, I placed my sell stop order right under the February 4th 2020. Consequently my order is open on February 27th.

The outcome

Right after the breakout day, the price dropped in a straight line in the next two days. Therefore, during this drop the price also hit the take profit order. Now, what’s interesting about this trade? There are two things. Firstly, is the way in which the price morphed from a head and shoulders pattern into a rectangle and only after the rectangle the price dropped. Secondly, the other interesting thing is that even if the first trade of the head and shoulders pattern is a loss, the second trade of the rectangle is a 1:3 risk reward winner trade.

The outcome of the rectangle pattern on GBPCHF daily chart

The conclusion

The most important conclusion here is to keep an eye on the chart after a trade is closed in a loss. Because there is a good chance for a second trade with a great outcome. As a result, in my case, even if I lost 0.5% in the first trade, I managed to get 1.5% on the second one. Therefore it means a net return of 1%. Pretty nice, right? Keep in mind that I used for both trades the same risk of 0.5%. This is what trading is all about.

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