What Is Rectangle?
A rectangle (or trading range) forms when price bounces between clearly defined horizontal support and resistance levels. Each bounce between these parallel lines represents a test of supply and demand at those price extremes. The pattern is essentially a period of balanced supply and demand where neither buyers nor sellers can gain the upper hand.
How Rectangle Works
Rectangles can be traded two ways: range trading (buying at support, selling at resistance within the pattern) and breakout trading (waiting for price to close above resistance or below support). Volume typically decreases during the rectangle and expands on the breakout. The measured move target is the height of the rectangle projected from the breakout point.
Why It Matters for Traders
Rectangles in crypto often resolve in the direction of the prior trend (continuation), but counter-trend breakouts also occur. The longer and more well-defined the rectangle, the more significant the breakout. Multiple tests of support/resistance absorb orders at those levels, making the eventual break more explosive.