A sideways range with roughly horizontal boundaries, traded either by fading the edges or by taking the eventual break.
A rectangle is the plainest form of a trading-range: repeated tests of the same ceiling and floor. It appears in both continuation and reversal roles, and the shape gives no hint which.
Range traders sell the top and buy the bottom with stops just outside, which works until it does not; the losing trade in this style is the breakout, and it can be large relative to the range's width. Breakout traders do the reverse and lose steadily while the range persists.
The important discipline is deciding which game you are playing before the trade, and accepting that the transition between regimes is where both approaches lose. Regime filters such as adx help a little, but they lag.
Original diagrams for the ideas on this page. Illustrative, not real market data.
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.Breakout and retest. Price stalls under the same level several times, pushes above it, then drops back to touch it from above before carrying on. That touch is the retest, where the old ceiling is tried as a floor. A break that falls straight back under it is a false breakout.
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