Two-sided pattern · neutral bias
Rectangle (Trading Range) pattern
A rectangle, or trading range, forms when price moves sideways between a flat ceiling and a flat floor. It reflects balance between buyers and sellers until a breakout settles it.
How to identify a rectangle (trading range)
- At least two highs at a similar level and two lows at a similar level.
- Price oscillating between them without trending.
- Clear rejections from both boundaries.
What confirms it
A close outside the range in either direction.
What invalidates it
A fast return inside the range after a breakout, which suggests a false break.
How traders project a target
Project the height of the range from the breakout level in the direction of the break.
Common mistakes
- Trading the middle of the range, where neither boundary offers a clear invalidation.
- Assuming the breakout direction before it happens.
- Ignoring false breaks, which are common at well-watched range edges.
Where it appears
Appears in every market and timeframe. Ranges often form before major news or after strong trends.
Frequently asked questions
Is a rectangle pattern bullish or bearish?
Neutral. It tends to break in the direction of the prior trend, but the breakout direction is what matters.
What is range trading?
Using the range boundaries as reference points while the range holds, with invalidation just beyond each boundary.
How can you tell a real breakout from a false one?
There is no certain way, but a close outside the range, follow-through on the next candles and a successful retest of the broken edge all add confidence.
Related chart patterns
Educational content only, not financial advice. Chart patterns describe probabilities, not certainties, and every pattern can fail. See our disclaimer.