Broadening Formations – The Market’s Secret Language

In the trading world, people spend years trying to find the “perfect” chart pattern. Double tops, head and shoulders, cup and handles—forget all of it. There’s only one chart pattern you need to know: Broadening Formations.

I know that sounds bold, but once you understand this concept, you’ll see it everywhere. Let’s break it down.

What Are Broadening Formations?

Broadening formations are the market’s secret language. It’s how price naturally moves—it expands over time. Picture this:

1. Price makes a higher high.
2. Price makes a lower low.
3. Rinse and repeat.

This is price discovery in action. The market is constantly testing both buyers and sellers, taking out their stops, and expanding the range.

How Do You Spot a Broadening Formation?

It’s simple:

1. Look for a higher high and a lower low over a series of bars.
2. Draw a line connecting the highs and another connecting the lows.
3. Congratulations, you’ve got a broadening formation!

While most traders panic when they see price breaking out of a range, The Strat teaches us to embrace it. These higher highs and lower lows give us targets to trade toward.

Why Broadening Formations Matter

Broadening formations tell us where price wants to go. If price makes a new low and starts reversing, guess what? It’s probably heading back to the other side of the range to take out the last high.

This is where we make our money. We’re timing our entries with precision, using actionable signals (like reversals) to ride the move from one side of the range to the other.

Your Homework

Take a look at a daily or weekly chart of your favorite stock. Can you find a broadening formation? (Hint: They’re everywhere once you know what to look for.)
In our next post, we’re going to talk about timeframe continuity—how to track who’s in control of the market at any given moment. This is where The Strat really starts to shine.