Technical Trading with Rectangles

Today we would see the Line Study method using Rectangles for trading in Indian Markets.

Rectangle refers to a chart pattern where a security’s price is trading within support and resistance levels that are flat and parallel to each other, which looks like a rectangle and hence its name. A breakout of the rectangle on either side with strong volume accompanying is considered to signal a strong trend in that direction.

This means that, the Trading is in a Range, usually referred as Trader's Remorse. See the figure below

The Bottom line is a Support Level Line and the Top line is a Resistance Level Line. Trader's should remain in cash during these ranges. However, during the breakout, you can notice that the Volume substantial increase, then you can see a Breakout on the upper side, if the volume is very less or even non existent, you can assume that the Breakout would be a bearish one.

Depending on the Volume Support and the Range Support, you can profitably take positions during Day Trading using this method.

Note that this should not be used as a standalone trading method.

Thank you for joining us in this discussion.

We will join you with the Market Outlook tomorrow.

Happy Evening & Good Night!
Day Trading Analyst