The box occurs when price is ‘trapped’ inside two parallel support and resistance levels. Make sure both levels were tested at least twice before declaring a box set-up. The psychology behind the pattern is a battle between the bulls and bears. It is a period in which no side of the market is stronger and the market is in equilibrium. Such periods must end eventually – by a breakout to one side, signaling the victory of one of the sides of the market.
We will then ‘join’ the winners by taking trades in the direction of the breakout. However, it is important to note that we will not trade the breakout of the ‘box’ itself, but the pullback to the box. As we have mentioned above, the breakout is not reliable enough for us to trade.
This pattern is highly reliable and results in at least 80% hit rate. Master its identification and trading and your trading profits will explode.
This is not another indicator that generates lagging signals – this pattern shows you exactly in which way the market is going to advance and plotsexact stop loss and take profit levels!