Two trades, same pair, same morning, both stopped out. You bought when price cleared the old high and it came straight back. You flipped short when it broke the old low, and it came straight back again. Neither entry broke your rules. The chart was widening underneath both of them.
That shape has a name, and it is the one structure that takes money from trend traders and range traders in the same session. By the end of this you will be able to name it before the second stop, understand exactly what it does to your risk, and decide whether it is worth trading on your account at all.
Key Findings
- Diverging rails define it: a broadening formation has rising highs and falling lows, so its two boundary lines spread apart while a triangle's pinch together.
- It breaks both playbooks: breakout entries reverse because the move was a swing, and reversal entries at the edge get overrun because the next swing is bigger than the last.
- Count turns before you draw lines: a formation worth naming shows several alternating touches against both rails, not two random spikes joined by hope.
- Shrink the position, not the stop: risk per trade stays fixed only if lot size falls as the required stop distance grows.
What is a broadening formation?
A broadening formation is a pattern where each swing high is higher than the last and each swing low is lower, so trendlines drawn across the highs and lows pull apart. Traders call it a megaphone, and it is sometimes described as a reversed or inverted triangle.
What it really shows is disagreement getting louder. In a triangle, buyers and sellers narrow the gap between the price they will accept. Here they do the opposite. Every leg overshoots the previous one, and neither side manages to hold the ground it takes.
Edwards and Magee, in Technical Analysis of Stock Trends (first published 1948), catalogued the broadening top as a formation appearing in unruly, emotionally driven markets rather than orderly trends, and they warned that it was awkward to trade rather than promising. Thomas Bulkowski’s Encyclopedia of Chart Patterns (2005) later separated several variants of it, including right-angled versions where one rail stays flat.
Read the two red turns: both entries were taken at a genuine break of the prior extreme, and both were reversed by the next swing, which an expanding range makes larger by definition.
Why does it hurt trend traders and range traders at once?
Because each style asks the chart for the one thing an expanding range refuses to give. The trend follower needs a break to keep going. The range trader needs the boundary to hold at the same price twice. A megaphone breaks the first rule by reversing, and the second by moving the boundary.
| What your style needs | What a broadening formation delivers |
|---|---|
| Breakout: a new high that keeps running | A new high that turns into the start of the next leg down |
| Range trade at the edge: a boundary that repeats | A boundary sitting further out than it was last time |
| Trend continuation: higher highs and higher lows | Higher highs with lower lows underneath them |
| Fixed stop distance from the last swing | A next swing built to exceed that distance |
- Breakout: a new high that keeps running
- A new high that turns into the start of the next leg down
- Range trade at the edge: a boundary that repeats
- A boundary sitting further out than it was last time
- Trend continuation: higher highs and higher lows
- Higher highs with lower lows underneath them
- Fixed stop distance from the last swing
- A next swing built to exceed that distance
How do you tell a megaphone from a triangle or a channel?
Look at what the two rails do to each other. Converging rails are a triangle or a wedge. Parallel rails are a channel. Rails that spread apart are a broadening formation, and that single difference changes everything about how you manage the trade. When a widening top after a trend starts to shrink back in, with lower highs and higher lows, the whole shape becomes a diamond chart pattern instead.
The left panel is tradable with one fixed stop all day. The right panel needs a different stop on every turn, which is the practical reason the same strategy produces different results in the two pictures.
| Formation | Rails | What the next swing does |
|---|---|---|
| Broadening formation | Diverge | Exceeds the previous extreme on both sides |
| Triangle | Converge, one side often flat | Shrinks toward an apex |
| Wedge | Converge, both sloping the same way | Shrinks while price still drifts one way |
| Channel | Parallel | Repeats at roughly the same width |
- Rails
- Diverge
- What the next swing does
- Exceeds the previous extreme on both sides
- Rails
- Converge, one side often flat
- What the next swing does
- Shrinks toward an apex
- Rails
- Converge, both sloping the same way
- What the next swing does
- Shrinks while price still drifts one way
- Rails
- Parallel
- What the next swing does
- Repeats at roughly the same width
Counting matters more than drawing. A shape worth naming shows several alternating touches, high then low then high, each one further out than its predecessor. Two spikes and a hopeful line is not a pattern, and the classic descriptions of a triangle formation apply the same discipline in reverse.
How should you size a trade when the range is widening?
Keep the money at risk fixed and let the lot size absorb the wider stop. This is the whole adjustment, and it is the opposite of what most traders do under pressure, which is to keep the lot size and tighten the stop until it sits inside the noise.
The two groups carry identical risk. Only the split between distance and size changed, which is why a volatility-scaled stop belongs with a volatility-scaled lot rather than on its own.
A measure of current range does the arithmetic for you, and the method in the ATR volatility stop guide sets the distance while consistent position sizing sets the lot. My own preference on a confirmed megaphone is simpler: trade it at half normal size or leave it alone. An indicator cannot fix a structure that is designed to exceed your last reference point. It can only tell you honestly when you are inside one.
Does the pattern move, or does your indicator move?
Both happen, and only one of them is a problem. A broadening formation legitimately extends its own rails: a new higher high is new information, and any honest drawing tool redraws the upper line to include it. That is the pattern growing, not the tool lying.
The failure is different. It is a signal that changes on a candle that has not finished, so the arrow you entered on is somewhere else by the close and your journal records an entry the chart no longer shows. A completed candle cannot change its high, low, or close, so a signal fixed at the close is a signal you can audit later. The full walkthrough on non-repaint indicators covers how to run that check yourself, and it matters more here than almost anywhere, since an expanding range produces exactly the mid-bar spikes that make a redrawing tool look brilliant in hindsight.
Where RelicusRoad Pro fits
Inside a widening range, the thing you most need is a level that is still where you left it when you go back to review the trade. RelicusRoad Pro commits its levels and signals once the candle has closed, and it does not quietly rewrite yesterday’s chart to look cleaner than yesterday felt. That gives you an honest record of which turns it actually called while the megaphone was forming.
It will not draw the rails for you, and it does not claim to know which leg is the last one. What it does is remove one variable from a setup that already has too many, which is the same reason the close-first approach underpins the failed breakout playbook.
Frequently asked questions
What is a broadening formation in trading?
A broadening formation is a chart pattern in which each swing high is higher than the one before it and each swing low is lower, so a line drawn across the highs and a line drawn across the lows spread apart rather than converge. The shape looks like a megaphone or a reversed triangle. It is a picture of volatility expanding: buyers and sellers keep overshooting each other, and every leg covers more ground than the previous one.
Is a broadening formation bullish or bearish?
Neither on its own. The pattern describes disagreement rather than direction, which is why it resists a simple bullish or bearish label the way a flag or a head and shoulders does not. Edwards and Magee, in Technical Analysis of Stock Trends (first published 1948), treated the broadening top as a late-cycle warning that a market had become emotional and poorly sponsored, so context around the formation matters far more than the shape itself.
How is a broadening formation different from a triangle?
The rails run in opposite directions. In a triangle the boundary lines converge, so each swing is smaller than the last and volatility contracts toward an apex. In a broadening formation the boundary lines diverge, so each swing is larger and volatility expands. That difference flips the trading problem: a triangle compresses risk into a single tight breakout, while a megaphone widens risk with every turn.
How do you trade a megaphone pattern?
Most traders should trade it smaller or skip it. If you do take it, work from the completed turns rather than the breaks: a reversal entry at a rail, with the stop outside the rail and the position cut to keep the money at risk constant, survives the structure better than a breakout entry that the next leg reverses. Waiting for price to leave the formation entirely and hold outside it is the more patient version of the same idea.
Why do stop losses get hit so often inside a broadening formation?
Because the boundary that defined your risk keeps moving away from you. A stop placed beyond the previous high is only beyond the previous high. In an expanding range the next leg is designed to exceed it, so a stop sized for the last swing is routinely too close for the next one. Traders who react by tightening the stop get hit faster; the fix is a wider stop with a smaller position.
Stopped out on both sides of the same range more than once this month? See how RelicusRoad Pro fixes its read at the candle close so you can tell a widening market from a moving signal.
Keep going on this topic
Support and Resistance Mastery: Zones, Breaks and Retests
Master support and resistance zones with repeatable drawing rules, breakout and retest confirmation, invalidation, position sizing and common mistakes.
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