Bilateral/Consolidation Chart Patterns Gold Trading

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

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

Consolidation Trading Patterns

Symmetrical triangles are xauusd chart patterns with converging gold 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.

Gold Trend-lines can be drawn connecting the lows & 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 pattern. An early or late break out is more prone to failure, and therefore less reliable. After a xauusd price breakout the apex forms support and resistance levels for the xauusd price. Gold 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 Gold trades.

When these consolidation patterns form we say that the xauusd 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 xauusd market can't decide which way to move.

Consolidation 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 xauusd traders make sure that we are on the side that is winning?

Break-Out Downwards Sell Gold Trading Signal after a Consolidation

Breakout Upward Buy Gold Trading Signal after a Consolidation

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

Well we wait until xauusd price moves past one of the lines and put buy or sell orders in that direction. After consolidating, If xauusd 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 gold orders. If you would like to know more about pending gold orders go to the topic: Stop Entry Gold 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 xauusd market xauusd price.

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

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

Rectangle Trading Pattern

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

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

A breakout of xauusd price action from this consolidation pattern forms when either of the horizontal line is penetrated and 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 - Consolidation Pattern

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