A pattern of successively higher highs and lower lows, producing an expanding range that reflects rising volatility and disagreement.
The opposite of a triangle. Each swing overshoots the last in both directions, so the boundaries diverge. It usually appears at moments of genuine uncertainty, around major news or at market turning points.
Broadening formations are hostile to most strategies. Stops placed inside the structure are repeatedly taken out in both directions, which is textbook whipsaw, and position sizing based on recent atr will be too large because volatility is still expanding.
The most defensible response is usually to reduce size or stand aside rather than to find a clever way to trade it. If you do trade it, size from the expanding range rather than the recent average.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Working out a position size. Three numbers decide how big a trade is: the account, the share of it put at risk, and the distance from entry to stop. One percent of $25,000 is a $250 budget, and a $0.50 stop divides into that 500 times.Range versus trend. On the left price keeps bouncing between the same floor and ceiling, which is a range. On the right each high and each low is higher than the last, inside a pair of sloping lines called a channel.
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