Megaphone pattern is a broadening chart formation that shows increasing volatility and signals potential market reversal or trend continuation.
Megaphone Pattern Explained: What It Is and What It Signals
The megaphone pattern is a broadening formation where price swings get bigger over time, so the chart starts to look like a widening cone. You’ll see it when the market can’t agree on direction and both sides keep pushing harder.
The two trendlines spread apart because buyers keep printing higher highs while sellers keep forcing lower lows. That’s the whole story: growing disagreement, growing volatility.
Megaphone Pattern Checklist: Key Characteristics
The megaphone pattern displays several defining features traders should be able to spot quickly:
Diverging trendlines that move away from each other, forming an expanding structure
A sequence of higher highs and lower lows as the swings widen
At least four to five clean swing points before you call it “real”
Volume rising as the swings expand (often uneven, but the bigger moves should attract participation)
Clear tug-of-war between buyers and sellers, not a smooth trend
Why the Megaphone Pattern Forms: Volatility and Indecision
This pattern usually shows up when uncertainty is high and positioning is messy. Buyers shove price up into new highs, then sellers hit back and dump it through prior support. Since neither side can hold control, the range stretches out.
When you see that widening action, it’s basically fear and greed ramping up at the same time. That’s why it can feel chaotic to trade.
How to Draw Megaphone Trendlines Correctly
For the upper line, connect at least two higher highs. For the lower line, connect at least two lower lows. The resistance line should slope up, while the support line slopes down.
Small drawing errors matter here. If you “force” the lines to fit, you’ll end up trading noise and calling it a pattern.
Megaphone Pattern Types: Symmetrical, Ascending, Descending
There are three common versions:
The symmetrical megaphone has both lines diverging at a similar rate. The ascending megaphone usually has a flatter lower line with an upper line pushing up. The descending megaphone flips that: the top is flatter while the lower line bleeds down.
How Volume Confirms a Megaphone Pattern Breakout
Volume is the filter. In a cleaner megaphone, the later swings tend to pull in more volume than the early ones, because volatility is expanding and more traders get involved.
If price is “breaking” lines on weak volume while momentum is fading, it’s often just a stop-run and a snap back into the range.
How to Trade the Megaphone Pattern: Entries, Exits, and Breakouts
How to Spot a Valid Megaphone Setup and Trade the Breakout
Traders spot megaphone patterns when price keeps stretching between two diverging trendlines. The better setups usually have at least five swings, because you want the market to prove it’s actually broadening and not just chopping.
Trading inside the pattern can work, but whipsaw risk is high. Most traders get better results waiting for a real close outside the structure. Breakout traders wait for price to decisively close beyond either trendline and they want volume to show up with it.
Best Entry Signals for Bullish and Bearish Megaphone Breakouts
For bullish breakout entries, wait for a close above the upper trendline, usually after the fourth or fifth swing. Volume should expand on the break. If you get a retest of the broken line and it holds as support, that’s often the cleanest trigger.
Bearish short entries are the same idea in reverse: a close below the lower trendline with a volume pickup. Retest failure from below is the “A+” version.
You can also trade the swings inside the structure (buying support, selling resistance), but you have to size down. The range is expanding, so stops need more room and fake breaks are part of the deal.
How to Set Profit Targets in a Megaphone Pattern
Three common ways to set targets:
Pattern Height Method: Measure the widest vertical distance inside the pattern, then project about 60% of that distance from the breakout point.
Fibonacci Extensions: Use the pattern height and project 62%, 79%, and 100% extensions from the breakout.
Reversal Midpoint: For counter-trend plays, target the pattern’s midpoint / widest area, especially if you’re fading an exhausted move.
Megaphone Pattern Risk Management: Stop-Loss and Position Sizing
Stop-loss placement needs to respect the volatility. For longs, stops usually go beyond the most recent swing low, or around a key retracement level (like the 50% of the last impulse). For shorts, stops go above the recent swing high.
Keep risk tight at the account level. With megaphones, the market can rip both ways, so risking more than 1–2% per trade is asking to get chopped up.
Also, don’t take these unless the math works. A minimum 1:2 risk-reward keeps you alive when the inevitable fakeout shows up.
Megaphone Pattern Psychology: Indecision, Volatility, and Common Mistakes
The megaphone pattern is a straight-up fight. Bulls push into new highs, bears slam it into new lows, and the range keeps widening. That’s why it screams indecision—but it’s aggressive indecision, not quiet chop.
False breakouts are the main reason traders hate this formation. Price pokes above or below the line, triggers entries, then snaps back into the pattern and cleans out stops. Most of those fake breaks happen on thin volume or weak momentum, basically market noise dressed up as a signal.
Whipsaw risk is even worse if you’re trying to swing-trade inside the structure. The swings get larger, reversals get faster, and you can take a bunch of “reasonable” losses back-to-back if your sizing and stops don’t account for the expanding range.
Common mistakes:
Jumping in before you have real confirmation
Stops that are too tight for the volatility expansion
Treating random wicks as a breakout
Calling it a megaphone too early (pattern isn’t mature)
Ignoring volume and momentum on the break
The edge comes from patience. Let it form, let it break, then trade the confirmation. Plenty of megaphones aren’t worth touching—selectivity is part of the strategy.
Best Indicators to Confirm a Megaphone Pattern Breakout
Indicators aren’t the setup, but they help you tell a real break from a head-fake.
RSI (Relative Strength Index) is useful for spotting momentum cracks. Over 70 is stretched, under 30 is washed out, but the bigger tell is divergence. If price prints a higher high while RSI prints a lower high, that’s often the market losing upside fuel. On the flip side, RSI pushing and holding above 50 during an upside break supports the long.
MACD (Moving Average Convergence Divergence) helps confirm momentum direction. A bullish break looks better when MACD crosses above the signal line and the histogram expands. If price is trying to break out while the histogram is shrinking, that’s a warning the move may fail.
Momentum indicators (rate of change, momentum oscillators) are simple: you want acceleration + volume on the break. If momentum is flat while price “breaks,” it’s often just a liquidity grab. Traders combining these signals achieve higher accuracy rates.
Moving averages can act like dynamic support/resistance. If a breakout clears the megaphone line and reclaims a key moving average (like the 50-day), that adds confluence. Volatility indicators can also help you gauge whether the market is expanding into a trend or just staying noisy.
Candlesticks matter at the edges. A bearish engulfing candle or doji rejection at the upper line often shows sellers defending. A strong bullish expansion candle through resistance is what you want to see on an upside break.
Indicator | Bullish Signal | Bearish Signal |
|---|---|---|
RSI | Above 50, rising | Below 50, falling; divergence |
MACD | Line crosses above signal | Line crosses below signal |
Momentum | Rising with volume | Flat or declining |
Candlesticks | Engulfing up | Engulfing down; doji rejection |
Pattern recognition gets sharper when you actually mark these up and replay them. Backtesting across multiple timeframes will show you which versions are worth your risk.
How to Recognize Megaphone Patterns on Real Charts
You get better at these by drilling them on real charts across stocks, FX pairs like EUR/USD, crypto like Bitcoin, and commodities like gold. Different markets have different “personalities,” but the megaphone behavior is the same: expanding swings, messy sentiment, and breakout traps.
Timeframe matters a lot. Day traders lean on 15-minute and 1-hour charts where you’ll see more frequent formations, while swing traders usually prefer daily/weekly where the levels are cleaner and the breakouts can actually run.
Context decides whether it’s a reversal or continuation. If a megaphone shows up after a long trend at a major top/bottom, it’s more likely to act like a reversal structure. Mid-trend megaphones can just be volatility expansion before continuation, so don’t skip the bigger picture.
For confirmation, keep it simple:
Price should actually travel through the interior of the structure (not just tag one line)
Each trendline needs at least two solid touches
Volume should generally expand as the swings get bigger
Combining the pattern with basic tools—support/resistance, moving averages, RSI/MACD, clean volume—usually beats trading it in isolation. Good charting software helps too, because sloppy trendlines lead to sloppy trades.
Megaphone Pattern Trading Strategy: How to Use It in Your Plan
The megaphone pattern is a broadening formation with diverging trendlines, higher highs, and lower lows. It signals expanding volatility and a market that can’t settle on direction.
If you want to trade it, the rules are pretty unforgiving: wait for a confirmed close outside the structure, demand volume/momentum to back it up, and plan the exit before you enter. Targets can come from pattern height projections or Fibonacci extensions, but the bigger key is risk control because fakeouts are common.
This is one of those patterns where patience pays. When you chase moves inside the cone, you’re usually just feeding the chop.
Keep studying live examples, then backtest systematically. Paper trade the break-and-retest setups until the execution feels automatic.
Used properly, the megaphone is a solid read on market stress and positioning. It won’t print easy trades, but it can offer clean opportunities when volatility expansion finally resolves.
How do you turn megaphone pattern trades into repeatable data you can improve?
Because megaphone formations are defined by expanding volatility, false breakouts, and strict confirmation rules, the real advantage often comes after the trade: reviewing whether your entries actually waited for a close outside the structure, whether volume and momentum confirmed, and whether your stop placement matched the swing points you identified. A consistent trading journal makes this measurable by logging the setup type (symmetrical/ascending/descending), timeframe, breakout vs. range trade, and the exact trigger (close, retest hold/fail), then tracking PnL alongside risk metrics like R-multiple and drawdown.
Over a meaningful sample size, those notes help you spot patterns in your own execution—like taking early signals, sizing too large in widening ranges, or ignoring weak-volume breaks—and tighten your plan accordingly. Using a dedicated tracker such as Rizetrade trading journal analytics dashboard for trade tracking, PnL metrics, and performance insights can support this process by keeping your reviews structured and comparable across markets and timeframes.