In this video, we're talking about rectangle tops and bottoms, so a rectangle, top or bottom is a
pattern that, as I'm sure you can guess, is shaped like a rectangle.
And what happens is that support and resistance comes into play at the same two levels and then you
eventually get a break out of it.
And the idea is that in the case of a rectangle top, you're rallying into it and then you break down.
It's a reversal.
It becomes a rectangle shape top to the market.
If you are falling and you get a rectangle consolidation area and you break out of it to the side,
it is a rectangle bottom, pretty straightforward.
And they happen on all time frames.
So you see them quite a bit.
It's just simply consolidation that doesn't lead to continuation, rather a reversal.
So let's go ahead and draw a rectangle here and the Litecoin market.
Now, how you will trade this is one of two ways, most of the time you will either take a measurement
and most people do it this way, you'll take a measurement and you'll aim for the exact same height.
So from eighty dollars to seventy six dollars is where you're looking at here.
Well, 80 minus 76 is four dollars.
So once you break out of 76, you're looking for a move down to 72, something that you clearly hit.
However, some traders, you know, with their stop loss are behind here.
Adjust this now, this is the way you're typically taught, but a lot of traders will, if they have
to risk this for this, well, that's a one to one trade.
They don't want that.
They want more.
So they aim for double.
And in this case, clearly you've gotten it because remember, you want to risk one to gain to minimum,
preferably three or four, but.
As this breaks down, they will move their stop loss to break even once you get that one to one and
then they'll let it run or they'll just let it run like that.
An alternative is to set a stop loss at half the height and then aim for the four dollars here, the
height of this trade.
And that gets you back to one wrist for two dollars.
Etherial.
You can see that there was a couple of rectangles here on the hourly chart, and you will get them more
frequently, obviously on shorter time frames, but there should be no doubt that those were both profitable
trade because you're only looking for twice the move are twice the height of the rectangle for the move.
Clearly, that was not an issue.
You can see that support breaks.
The reverse of that recent trend tends to be pretty brutal.
And again, you should be able to get twice in a continuation move.
There are already a lot of people on this side of the move in this case going higher into this, so
that would be one reason to think that maybe the momentum isn't going to be as quick.
You'll probably be more apt to get the occasional pullback.
Now, keep in mind, this is on the hourly chart.
So, you know, you need to look for quicker moving indicators, you can see where you got a crossover
here, signal crossover in the Makdisi both times.
And then by the time we broke down, we were starting to scream towards the zero line.
So that would have been something that would have caught your attention.
Furthermore, on the second one, this would have been an area where we had seen resistance recently.
So you can see how using some of these indicators can give you an idea as to, OK, not only is the
pattern setting up, not only have we, you know, in this case broken through support or broken through
resistance on or on a rectangle bottom, but now you have people who pay attention to Magdy D, paying
attention to it, et cetera, et cetera.
In the next video, I'll be talking about head and shoulders, one of the trading community's favorite
patterns.