Consolidation Flags and Broadening Formations

There is a new article on Investopedia with instructions on trading 2 consolidation patterns for profit.

The first is the flag formation which is a common formation in the currency market and indicative of a continuation trend.

1.    Apply trendline to identify the flag formation
2.    Place stop 5 pips above the high or 5 pips below the low of the recently closed candle ONCE a close above or below the trendline has occurred.
3.    Place a corresponding stop two-thirds below previous session’s high or low.
4.    Use your specific rules regarding corresponding limits 

The second is the broadening formation which is commonly a consolidation before the reverse but could also be a continuation indicator

 
1.    Identify the broadening formation through diverging trendlines
2.    Apply entry 5 pips below the low or high of the session once a break has occurred
3.    Use appropriate money management
4.    Use your specific rules regarding corresponding limits

This article is elementary yet a good refresher.  http://www.investopedia.com/articles/forex/06/ConsolidationPatterns.asp

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