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Top Escape Pattern - Box

The box is formed by horizontal trend lines connecting two parallel troughs and horizontal resistance lines connecting two parallel peaks. Generally, the range between the horizontal trend line and the horizontal resistance line is referred to as the box. The horizontal trend line is called the bottom of the box, and the horizontal resistance line is called the top of the box.

The characteristics of the box are as follows:

1. In a bearish market, a rectangular consolidation is a resistance pattern in the middle of a decline; the longer it lasts, the greater the probability of a decline. In a bullish market, a rectangular consolidation is merely a consolidation pattern in the process of price increase.

2. The consolidation period of the box pattern is considered a medium-term consolidation in terms of time, and its formation period is generally longer than that of triangle or flag patterns, usually at least more than 30 trading days.

3. The breakout of the box is marked by the closing price at the upper or lower boundary of the rectangle, indicating the completion of the rectangle pattern. After the price breaks through, there may sometimes be a pullback to confirm whether the breakout is valid; subsequently, the price continues to move in the original trend direction.

4. In a rising market, the trading volume will significantly increase when breaking through the box pattern; in a declining market, a downward breakout does not require a significant increase in trading volume.

When encountering a box consolidation pattern, what operational strategies are there?

1. Once the box pattern is initially formed, you can use the characteristics of having a support line below and a resistance line above the box to buy at the lower boundary of the box and sell near the upper boundary, executing short-term trades back and forth.

2. Once an effective breakout of the box is formed, careful decision-making is required; in an upward trend, when the box breaks upward with volume, you should firmly hold the asset; in a downward trend, when the box breaks downward, you should quickly cut losses and exit.

3. The theoretical height of the box breakout is usually equal to the height of the box itself, measured from the upper boundary of the box to an equal distance above or below, which represents the theoretical target price when the asset rises or falls.

In actual operations, attention should be paid to the following two points:

1. When the price falls from the top of the box to the bottom, the trading volume should gradually decrease; when the price rises again, the trading volume should increase.

2. Short-term trades should be quick in and out, using the box bottom as the stop-loss point. When the price falls below the box bottom, stop-loss should be executed promptly. #小白必知 #BTC☀