A rectangle is a market moving sideways between clear support and resistance.
Two ways to play it
- Range trading: buy near support, sell near resistance, stop outside the range boundaries. Suitable when the range is wide and clean.
- Breakout: wait for a close through one of the sides, with a target equal to the height of the range.
Be careful
Ahead of a breakout, false breaks are common — price breaks through briefly and then returns. Waiting for the close and/or a retest reduces these traps.
Key points
- Decide first: are you range trading or waiting for a breakout? Do not switch halfway through.
- Trend-following strategies perform poorly inside a rectangle.
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