Consolidation Detector

Minimum 5-10 bars for a valid pattern; 20+ bars is more significant. Longer consolidations (50+ bars) often lead to major moves. Very short consolidations (2-3 bars) may just be noise. Time in range correlates with breakout magnitude.

Depends on your style. Range trading: lower risk per trade, multiple opportunities, but may get caught by breakout. Breakout trading: catches the big move, but many false breakouts. Consider: range trade early in consolidation, prepare for breakout as it ages.

Consolidation: price stays within defined range, respects boundaries, and eventually breaks out. Reversal: price breaks key support/resistance and continues. Key: if boundaries hold = consolidation; if boundaries break and continue = potential reversal. Wait for confirmation.

False breakout: price breaks boundary but quickly reverses back inside range. Avoid by: 1) waiting for candle CLOSE beyond level, 2) requiring volume confirmation (1.5x+ average), 3) waiting for follow-through bar, 4) considering retest entry. False breakouts are common.

Range trading: target is opposite boundary (buy at support, target resistance). Breakout trading: measured move = range height projected from breakout. Example: range $50-$55 ($5 height); break above $55; target = $55 + $5 = $60.

Bollinger Bands squeeze (narrow) during consolidation. Calculate Band Width: (Upper - Lower) / Middle. When Band Width reaches multi-period low, consolidation is mature. Trade breakout when bands expand. Band Width percentile can quantify squeeze intensity.

Ascending: flat top, rising bottom - bullish bias (~70% up). Descending: falling top, flat bottom - bearish bias (~70% down). Symmetric: converging equally - neutral, tends to continue prior trend (~60%). Wedges are like triangles but both boundaries tilt same direction.

Watch volume at boundaries. If volume higher at resistance tests, sellers may be distributing - bearish bias. If volume higher at support tests, buyers may be accumulating - bullish bias. Also, declining volume during consolidation is healthy for any breakout.

Higher TF (daily/weekly): identify major consolidation. Lower TF (4H/1H): refine entries. Example: Daily consolidation $50-$55; use 4H chart to find bullish signals at daily support for entry. Or: trade 4H breakout of daily consolidation for early entry.

Multiple indicators help: ATR (declining = consolidation), Bollinger Band Width (narrow = squeeze), simple range calculation (N-bar range < threshold). Combine for best results. Manual visual inspection of boundaries is also important.

Steps: 1) Calculate N-bar range and compare to ATR, 2) If range < ATR × threshold, flag as consolidation, 3) Identify boundaries (highs and lows clustering), 4) Classify pattern (regression slopes), 5) Score quality (duration, tightness, volume), 6) Monitor for breakout conditions.

Key features: consolidation_duration (longer = larger move), range_tightness (tighter = more explosive), volatility_percentile (lower = more compression), volume_trend (declining = energy building). Regression model can predict expected move size based on these features.

Calculate Bollinger Bands (20-period, 2 std dev) and Keltner Channels (20-period, 1.5 ATR). Squeeze condition: BB_upper < KC_upper AND BB_lower > KC_lower. Release: either BB band outside corresponding KC band. This indicates extreme volatility compression and imminent expansion.

Range trading: 55-65% win rate with 2:1 potential R:R at boundaries. Breakout trading: 50-60% unfiltered, 60-70% quality-filtered. Edge = (win% × avg_win) - (loss% × avg_loss). Quality filtering (volume, pattern type, duration) significantly improves edge.

Extended consolidation is common. Options: 1) Continue range trading at boundaries with reduced size (breakout risk increases), 2) Tighten breakout triggers (nested pattern), 3) Use volatility indicators (extreme squeeze = imminent break). Very long consolidations often have very large breakouts.