Part 1: The Basics – Timeframes, Pairs, and Indicators
1.1 The Rectangle Defined
The entire trading plan and strategy are dependent on one thing: the rectangle. This single box defines everything for us:
● Entry: We will have an entry inside the rectangle.
● Confirmation: The rectangle provides the necessary confirmation.
● Stop Loss (SL): The SL is placed above or below the rectangle, depending on if the trade is bullish or bearish.
● Take Profit (TP): The TP is set way too far from the rectangle, looking for high reward-to-risk setups.
1.2 Timeframes:
The strategy utilizes the 15-minute (M15) chart and the 1-minute (M1) chart.
● M15 Chart: Used to identify the high probability setup (M15 highs and lows).
● M1 Chart: Used for the precise entry. The 1-minute decides everything—you either get the entry, or you don’t.
1.3 Pairs and Trading Sessions
This strategy is repeatable and simple. It is highly versatile and works on all pairs:
● Forex
● Crypto
● Futures, etc.
It also works any time of the day when the setup is valid. However, setups are frequently found around key sessions like Asia, London, or New York.
1.4 Indicators: Identifying Direction
To ensure we are trading on the right side of the market, we must first identify the direction.
The most basic and mechanical way to identify direction is by using the Exponential Moving Average (EMA):
1. Indicator Selection:
Use either the 50 EMA or the 200 EMA. The 200 EMA generally gives the overall trend and lasts longer, while the 50 EMA is more sensitive.
2. The Direction Rule:
○ If the price is above the moving average, we look for longs (buys), as that’s where the continuation is going to be.
○ If the price is below the moving average, we look for shorts (sells).
3. Structure Check:
We must have valid structure above or below the EMA; we should not be ranging just around the moving average.
Part 2: Foundation
2.1 Continuation is Key
For this specific strategy, we focus only on continuation setups. Continuation means a setup with the trend.
● We avoid reversals (setups against the trend).
● In an Uptrend: We focus on the Lows.
● In a Downtrend: We focus on the Highs.
We are looking for highs or lows that align with the trend and have a key level (like an imbalance) below or above them.
2.2 Strength vs. Weakness: The Trigger
The setup relies entirely on identifying Weakness in the market.
● Strength is a continuation—when the price displaces below a low and closes below (or above a high and closes above). This signals disrespect of the level.
● Weakness (Our Focus) is when price goes lower (or higher) but experiences a rejection and fails to close beyond that low/high, closing instead above the low (in a bullish scenario) or below the high (in a bearish scenario). This signals a potential reversal from that specific level. This rejection is sometimes referred to as the wick rejection.
2.3 The Highest Probability Filters
To maximize quality over quantity, look for M15 highs and lows that meet these criteria:
1. Inside Imbalances: Highs and lows that reside inside of imbalances or fair value gaps are preferred.
2. Sessions Highs and Lows: Focus on highs and lows of sessions (Asia, London, or New York).
Part 3: The 3-Steps
The main goal is catching M15 high-probability liquidity sweeps (fakeouts) using the M1 chart.
Step 1: Mark the Valid M15 High or Low
Identify a high or low on the 15-minute chart that satisfies all conditions:
● It must be with the trend.
● It should ideally be inside an imbalance.
● It must be part of a clean structure (e.g., following a structure break).
Step 2: Wait for Price to Sweep and Close (The Weakness Trigger)
Wait for the price to sweep past the marked high or low, but then fail to close convincingly.
● Bullish Scenario: We want to see the price take the low but then have the candle close above the low. This closure gives us the potential setup.
● Bearish Scenario: We want to see the high taken by a bullish candle (if the move hasn't started yet), and then the candle must close below the high (signaling weakness).
This closure creates the wick rejection. Without this trigger, we do not enter.
Step 3: Draw the Rectangle and Enter on the M1 Flip
Once the M15 candle closes, confirming the weakness (Step 2), we execute the final steps:
A. Draw the Rectangle
The rectangle is drawn based on the M15 candle that triggered the weakness.
● Drawing the Rectangle (Bullish Example): Mark the rectangle from the closing price of the M15 candle to the low of that same candle.
● Drawing the Rectangle (Bearish Example): Mark the rectangle from the closing price of the M15 candle to the high of that same candle.
B. Find the M1 Entry Trigger
Immediately switch to the 1-minute time frame. The 1-minute price action around the rectangle determines your entry.
The Main Entry Trigger (Safest): Wait for a 1-minute candle to close outside (below or above) the rectangle.
● Bullish Entry: A 1-minute candle must close above the rectangle. This closure is the first step of the "flip" happening and is your signal to enter immediately.
● Bearish Entry: A 1-minute candle must close below the rectangle.
Alternative/Aggressive Entry: You can sometimes take a riskier entry as price goes inside the rectangle before the closure if there is a valid key level inside it anticipating reversal.
C. Setting Stop Loss (SL) and Take Profit (TP)
● Stop Loss (SL): Place the SL slightly above the high or below the low that formed the rectangle.
● Take Profit (TP): The TP is set way too far from the rectangle. You can target the next strong key level visible on the M15 chart, or simply aim for a 3:1 RR minimum.
Self-Discipline Tip: After entry, it is highly recommended to only focus on the 15-minute time frame to ignore all the noise on the one minute time frame.
Simple Checklist
Use this checklist before every trade to confirm you have a high-probability setup:
Final Word
You now have a complete trading strategy. The rectangle method works on any pair, any timeframe, and you can start using it immediately.
Many ask, "Is this all I need?"
It depends. This method works best for continuation setups on M15 and M1 with clear structure and valid highs/lows.
Happy trading!
Credits: _Mulham
1.1 The Rectangle Defined
The entire trading plan and strategy are dependent on one thing: the rectangle. This single box defines everything for us:
● Entry: We will have an entry inside the rectangle.
● Confirmation: The rectangle provides the necessary confirmation.
● Stop Loss (SL): The SL is placed above or below the rectangle, depending on if the trade is bullish or bearish.
● Take Profit (TP): The TP is set way too far from the rectangle, looking for high reward-to-risk setups.
1.2 Timeframes:
The strategy utilizes the 15-minute (M15) chart and the 1-minute (M1) chart.
● M15 Chart: Used to identify the high probability setup (M15 highs and lows).
● M1 Chart: Used for the precise entry. The 1-minute decides everything—you either get the entry, or you don’t.
1.3 Pairs and Trading Sessions
This strategy is repeatable and simple. It is highly versatile and works on all pairs:
● Forex
● Crypto
● Futures, etc.
It also works any time of the day when the setup is valid. However, setups are frequently found around key sessions like Asia, London, or New York.
1.4 Indicators: Identifying Direction
To ensure we are trading on the right side of the market, we must first identify the direction.
The most basic and mechanical way to identify direction is by using the Exponential Moving Average (EMA):
1. Indicator Selection:
Use either the 50 EMA or the 200 EMA. The 200 EMA generally gives the overall trend and lasts longer, while the 50 EMA is more sensitive.
2. The Direction Rule:
○ If the price is above the moving average, we look for longs (buys), as that’s where the continuation is going to be.
○ If the price is below the moving average, we look for shorts (sells).
3. Structure Check:
We must have valid structure above or below the EMA; we should not be ranging just around the moving average.
Part 2: Foundation
2.1 Continuation is Key
For this specific strategy, we focus only on continuation setups. Continuation means a setup with the trend.
● We avoid reversals (setups against the trend).
● In an Uptrend: We focus on the Lows.
● In a Downtrend: We focus on the Highs.
We are looking for highs or lows that align with the trend and have a key level (like an imbalance) below or above them.
2.2 Strength vs. Weakness: The Trigger
The setup relies entirely on identifying Weakness in the market.
● Strength is a continuation—when the price displaces below a low and closes below (or above a high and closes above). This signals disrespect of the level.
● Weakness (Our Focus) is when price goes lower (or higher) but experiences a rejection and fails to close beyond that low/high, closing instead above the low (in a bullish scenario) or below the high (in a bearish scenario). This signals a potential reversal from that specific level. This rejection is sometimes referred to as the wick rejection.
2.3 The Highest Probability Filters
To maximize quality over quantity, look for M15 highs and lows that meet these criteria:
1. Inside Imbalances: Highs and lows that reside inside of imbalances or fair value gaps are preferred.
2. Sessions Highs and Lows: Focus on highs and lows of sessions (Asia, London, or New York).
Part 3: The 3-Steps
The main goal is catching M15 high-probability liquidity sweeps (fakeouts) using the M1 chart.
Step 1: Mark the Valid M15 High or Low
Identify a high or low on the 15-minute chart that satisfies all conditions:
● It must be with the trend.
● It should ideally be inside an imbalance.
● It must be part of a clean structure (e.g., following a structure break).
Step 2: Wait for Price to Sweep and Close (The Weakness Trigger)
Wait for the price to sweep past the marked high or low, but then fail to close convincingly.
● Bullish Scenario: We want to see the price take the low but then have the candle close above the low. This closure gives us the potential setup.
● Bearish Scenario: We want to see the high taken by a bullish candle (if the move hasn't started yet), and then the candle must close below the high (signaling weakness).
This closure creates the wick rejection. Without this trigger, we do not enter.
Step 3: Draw the Rectangle and Enter on the M1 Flip
Once the M15 candle closes, confirming the weakness (Step 2), we execute the final steps:
A. Draw the Rectangle
The rectangle is drawn based on the M15 candle that triggered the weakness.
● Drawing the Rectangle (Bullish Example): Mark the rectangle from the closing price of the M15 candle to the low of that same candle.
● Drawing the Rectangle (Bearish Example): Mark the rectangle from the closing price of the M15 candle to the high of that same candle.
B. Find the M1 Entry Trigger
Immediately switch to the 1-minute time frame. The 1-minute price action around the rectangle determines your entry.
The Main Entry Trigger (Safest): Wait for a 1-minute candle to close outside (below or above) the rectangle.
● Bullish Entry: A 1-minute candle must close above the rectangle. This closure is the first step of the "flip" happening and is your signal to enter immediately.
● Bearish Entry: A 1-minute candle must close below the rectangle.
Alternative/Aggressive Entry: You can sometimes take a riskier entry as price goes inside the rectangle before the closure if there is a valid key level inside it anticipating reversal.
C. Setting Stop Loss (SL) and Take Profit (TP)
● Stop Loss (SL): Place the SL slightly above the high or below the low that formed the rectangle.
● Take Profit (TP): The TP is set way too far from the rectangle. You can target the next strong key level visible on the M15 chart, or simply aim for a 3:1 RR minimum.
Self-Discipline Tip: After entry, it is highly recommended to only focus on the 15-minute time frame to ignore all the noise on the one minute time frame.
Simple Checklist
Use this checklist before every trade to confirm you have a high-probability setup:
Final Word
You now have a complete trading strategy. The rectangle method works on any pair, any timeframe, and you can start using it immediately.
Many ask, "Is this all I need?"
It depends. This method works best for continuation setups on M15 and M1 with clear structure and valid highs/lows.
Happy trading!
Credits: _Mulham
