How to Trade Breakouts in Gold
With consolidation chart patterns the xauusd market can move in any direction after a xauusd price breakout. Consolidation xauusd chart patterns are used to identify break-out patterns in gold charts. There are two different types of consolidation chart patterns that form on xauusd charts:
- Symmetric Triangles - Consolidation Patterns
- Rectangles - Range Gold Chart Patterns
Consolidation Trading Patterns
Symmetrical triangles are xauusd chart patterns with converging trend-lines that form a xauusd price consolidation period that signals there is going to be a xauusd price breakout in one direction after this xauusd chart pattern breaks out in one direction. The buy signal from a symmetrical triangle is the upside xauusd price break, while a downside xauusd price break is a sell signal. Ideally, a the xauusd price breaks out from a consolidation chart pattern prior to reaching the apex of the triangle.
Gold Trend lines gold trend lines can be drawn connecting the lows & highs of the consolidation pattern for the xauusd price, the trend lines formed are symmetric and converge to form an apex - symmetric triangle pattern. A xauusd price break out should occur somewhere between 60% - 80% into the triangle consolidation pattern. An early or late gold break out is more prone to gold whipsaws, and therefore less reliable. After a xauusd price breakout to one side the apex of the symmetric triangle forms the support and resistance levels for the xauusd price. Gold price that has broken out of the consolidation chart pattern should not retrace past the apex. The apex is used as a stop-loss setting level for the open xauusd trades placed after a xauusd price breakout.
When gold consolidation patterns form we say that the gold market is taking a pause before deciding the next direction to take - this also signals an impending xauusd price breakout - How to Trade Breakouts in XAUUSD - How to Identify Breakout Pattern - Breakout Strategy Gold.
These gold consolidation patterns form when there is a tug of war between buyers & sellers & the xauusd market can't decide which way to move.
Consolidation Patterns - How to Trade Breakouts in XAUUSD - How to Identify Breakout Pattern
However, this consolidation chart pattern cannot go on forever and just like in a tug of war one side eventually wins, the xauusd chart example below shows how the consolidation pattern eventually had a xauusd price break out & moved in one direction.
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After xauusd price consolidating, If xauusd price breaks-out the upper line we open buy gold trades, if xauusd price breaks-out the lower line we open sell xauusd trades.
Rectangle Trading Pattern
A rectangle consolidation pattern is a trading range with narrow xauusd price action that forms a consolidation period in gold market. The gold trading range is defined by 2 parallel gold trend lines which are horizontal and these indicate the presence of support and resistance levels at this particular area. Rectangle consolidation chart pattern is drawn on a gold chart using a rectangle, therefore, the name gold rectangle chart pattern.
For this gold consolidation chart pattern, xauusd price forms a series of highs & lows that can be connected with horizontal gold trendlines that are parallel to each other. Rectangle consolidation pattern forms over an extended period of time giving this gold pattern its rectangle shape.
A gold breakout of xauusd price action from this rectangle consolidation chart pattern forms when either of the horizontal line is penetrated and the gold trading range of this rectangle gold pattern is broken. An upside xauusd price breakout is a buy signal. A downside xauusd price breakout is a sell xauusd trade signal.
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Gold Price Breaks Out of rectangle consolidation range after a period of time and price continues to move upward after an upwards xauusd price breakout.
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