Price patterns are very important for medium and long-term traders. It is like a “compass” that tells them the upcoming direction of the market with high accuracy. It is also not surprising to see a trader who enters a position with a price pattern making huge profits because it is so obvious. So in this article, I want to share with you two useful patterns – the Broadening Top/Bottom pattern when opening a long order.
What are Broadening Top and Broadening Bottom?
Broadening Top and Broadening Bottom are relatively common patterns in the financial market. They are created when the price moves from left to right in an increasingly wide range, consistently making higher highs and lower lows.
Broadening Top usually appears at the top of trends.
On the contrary, Broadening Bottom is usually formed at the bottom of trends.
Features of the Broadening Top/Bottom pattern
In each pattern, if we connect the peaks, we get a resistance level. If we connect the troughs, we get a support level. The pattern can end in either a bullish or bearish direction.
After the Broadening Top/Bottom breaks out of a support or resistance level, the usual price move target is equal to the height of the pattern.
Note: The Broadening Top/Bottom pattern must touch 2 support/resistance about 5-6 times before breaking out and developing a strong uptrend or downtrend. You need to focus when the support/resistance levels of the pattern are touched for the 5th time.
How to trade with the Broadening pattern
With Broadening Top
When the price breaks out of the resistance level and makes a new high, it is called a Broadening Top. Wait for the candle to close and break out of the resistance level or wait for the price to pull back. We will start opening bullish orders in an uptrend.
Note: You have to wait for the candle to close to know exactly if there is a real or false breakout.
With Broadening Bottom
In contrast to Broadening Top, when the price breaks out of the support level and creates a new bottom, it is called Broadening Bottom.
Wait for the candle’s price to officially close and break out the support line. At that time, we will start to place a bearish order.
Trading with price patterns is easy and has a high probability of success. The difficulty lies in your ability to recognize the patterns as they appear. Remember, the Broadening Top/Bottom pattern occurs after a strong uptrend/downtrend. They move narrowly first, then widen, and the price hits the support/resistance levels about 5-6 times. In addition, you should also combine other technical indicators to increase efficiency. Good luck with your trading!
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