Range trading the rectangle pattern: edges, stops and exits
The Gatilho Markets team · 28 October 2026 · 5 min read · How we write
In short
- A range should be at least three times as tall as the stop you need.
- The middle of the range is the worst place to open a trade.
- A close beyond the edge ends the range card.
Markets spend a large part of their time going sideways, and many trend setups lose money there. The rectangle pattern is how you trade that sideways time on purpose instead of by accident: two flat lines, a clear top and bottom, and rules for both edges.
What makes a rectangle
- A flat top touched at least twice.
- A flat bottom touched at least twice.
- A range wide enough that a trade from one edge to the other is worth more than the stop. As a rough guide, the height should be at least three times the stop you need.
If the lines slope, it is a channel or a triangle; see ascending vs descending triangles.
The card (trading inside the range)
| Line | Rule |
|---|---|
| Context | Higher timeframe without a clear trend, or the range sits between two higher-timeframe levels |
| Zone | The outer 20% of the range at the top (sells) or bottom (buys) |
| Trigger | A rejection candle that closes back toward the middle |
| Stop | Beyond the range edge, by a buffer you decide in advance |
| Target | The middle of the range first, the opposite edge second |
| Exit rule | A close beyond the edge ends the range idea for this card |
The middle of the range is the worst place to open a trade: the distance to the stop and to the target are both unclear. Many traders draw a line at the midpoint and refuse to enter near it.
Worked example
AUDUSD, H1. Top 0.6650, bottom 0.6590 (60 pips). Price drops to 0.6596 and a candle closes at 0.6604 with a long lower wick.
| Item | Value |
|---|---|
| Entry (buy) | 0.6605 |
| Stop | 0.6582 (23 pips, under the bottom with a buffer) |
| Target 1 | 0.6620 (midpoint, 15 pips) |
| Target 2 | 0.6645 (40 pips, just under the top) |
| Size for $46 risk | 46 ÷ (23 × 10) = 0.20 lot |
Taking half at the midpoint and half near the top gives an average reward of 27.5 pips, about 1.2R. That is why the height of the range matters so much.
Illustrative calculation, not an expectation of results.
Work through your own split in the risk-reward calculator; confirm the pip value for your pair with the pip value calculator.
When the range ends
Ranges end with a break. A close beyond the edge ends the range card and may start a different one, the breakout and retest. If price breaks and quickly closes back inside, you are looking at a false breakout and the range is still alive. Writing which card applies in each case keeps you from trading both at once.
Practical notes
- Ranges often form in the Asian session and break near the London open; check the market sessions tool for Brasília times.
- Count your touches honestly. Four clean touches beat six that need squinting.
Trading involves risk, and most retail traders lose money.
Questions people also ask
How many touches make a valid rectangle?
At least two on the top and two on the bottom, counted honestly.
Why take part of the trade at the midpoint?
Ranges often stall in the middle. A split exit is one way to handle that, and it lowers the average reward, so the range must be wide.
What happens when the range breaks?
The range card is finished. A break-and-retest card may apply instead, but never both at once.
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Take the quizTrading financial markets carries a high level of risk and can result in the loss of all the money you invest. Gatilho Markets content is for education only and is not investment advice. Past results do not guarantee future results.