Every Trap the Market Lays Has a Shape. This One Is a Megaphone.
A complete guide to broadening formations, why they're the most misunderstood pattern in technical analysis, and how The Strat turns the chaos inside them into some of the highest-probability trades
Trading Decisions Lab · Deep Dive · Issue No. 01 · ~18 min read
Pull up any chart of the S&P 500 from early 2018. Or NQ from Q4 2021. Or almost any large-cap equity right before a major inflection. You’ll notice something if you know what to look for: the swings keep getting bigger. Each high is higher than the last. Each low is lower. The range is literally expanding — widening like a megaphone pointing to the right.
Most traders see this and freeze. The pattern looks random. The whipsaws are brutal. The normal playbook — buy support, sell resistance — fails repeatedly because the boundaries themselves keep moving. So traders either avoid it entirely, or they get chopped to pieces trying to catch every swing.
Here’s what they’re missing: broadening formations are not chaos. They are a very specific kind of order. They are the market’s conflict made visible — a tug-of-war between bulls and bears so evenly matched that both sides keep making new extremes. And once you understand the structure of that conflict, you can stop guessing at the middle and start trading the edges with precision.
That’s exactly what this guide is about. We’re going to break down broadening formations at a level most traders never reach — the pattern anatomy, the six distinct types, how they behave, how to classify them, and most importantly, how to combine them with The Strat’s bar-by-bar methodology to get high-probability, clearly-defined setups with entries, stops, and targets.
By the end of this, the megaphone won’t look like chaos anymore. It’ll look like a map.
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Part I: The Strat — The Language of Price Action
Before we can talk about broadening formations intelligently, we need a shared language for describing what price is actually doing bar by bar. That language is The Strat.
Developed by Rob Smith, The Strat strips price action down to its most fundamental element: the relationship between any given bar and the bar immediately before it. That’s it. No indicators. No moving averages. Just this single question: did the current bar take out the prior bar’s high, its low, both, or neither?
The answer gives you one of four bar types:
These four types — the 1 (Inside), 2U (Up), 2D (Down), and 3 (Outside) — become your vocabulary for reading markets at any timeframe, any instrument. A daily chart, a weekly chart, a 5-minute chart — all bars resolve into one of these four states. And the sequence of these states tells you something profound about what the market is doing and what it’s about to do.
The 1-1 setup is particularly important: two consecutive inside bars means the market is coiling — compressing energy before a directional resolution. When that resolution comes, it tends to be sharp, clean, and fast. These are the setups Strat traders circle in red.
When you layer multi-timeframe analysis onto this — what’s the weekly bar doing while the daily bar is setting up? — you get a confluence system of extraordinary power. A 2U on the daily aligning with a 2U on the weekly, both pointing in the same direction, is not just a signal. It’s institutional pressure confirming retail price action.
This bar-by-bar language is the foundation. Now let’s add the formation it gets layered on top of.
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Part II: The Broadening Formation — Anatomy of Conflict
A broadening formation — called a megaphone, an expanding range, or simply a broadening — is formed when price makes a series of higher swing highs and lower swing lows over time. Unlike a typical channel where boundaries are parallel, the broadening formation’s boundaries are diverging. The upper boundary tilts upward. The lower boundary tilts downward. The range is getting wider with every swing.
What you’re looking at when you see this pattern is the literal shape of institutional disagreement. Large players are simultaneously loading longs at new lows and offloading at new highs — because the range itself has become the trade for them. Retail traders, by contrast, see the higher highs and buy breakouts. They see the lower lows and panic-sell. Both sides keep getting harvested.
This is why the megaphone is a liquidity machine. Every swing to a new extreme creates a cluster of stop orders. Those stops get run. Then price reverses. The cycle repeats — with bigger and bigger swings — until one side finally overwhelms the other and the formation resolves directionally.
The Three Zones That Define Everything
Once you identify a broadening formation, the entire trading logic collapses into a single principle:
① Upper Edge (top 15–20% of range) — High-probability SHORT zone. Expect rejection and reversal.
② Lower Edge (bottom 15–20% of range) — High-probability LONG zone. Expect support and reversal.
③ Middle Zone (the 60–70% in between) — Avoid. This is noise. Entries here have poor risk/reward and no clean reference points.
The middle zone is where most traders get destroyed inside broadening formations. They see a big red candle and short. They see a big green candle and go long. Both make sense in isolation. But without knowing where price is in the formation — whether you’re near an edge or stuck in the belly — you’re essentially guessing.
Location changes everything.
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Part III: The Seven Formation Types — Not All Megaphones Are Equal
Here’s where it gets nuanced — and where most technical analysis material falls short. Not every broadening formation is a symmetric megaphone with equal slopes. The shape of the expansion carries directional bias information. Understanding these variants is what separates traders who use broadening formations as a blunt instrument from those who use them with surgical precision.
The practical implication: when you’re at the lower edge of a Broadening Wedge Bottom (flat support, rising highs), you have both formation bias AND location bias pointing you long. That’s a very different trade than being at the lower edge of a classic Megaphone where the formation itself is neutral. Bias stacking is how you filter from “possible setup” to “compelling setup.”
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Part IV: The Strat Triggers — Where Theory Becomes Trade
Now we get to the actual execution layer. You’ve identified the formation type. You’ve classified the location — upper edge, lower edge, or middle. You know the formation’s bias. Now you need a trigger: a specific bar event that confirms price is actually rejecting the edge rather than breaking through it.
This is where The Strat’s bar classification does its most important work.
The 2-2 reversal is the bread and butter of broadening formation trading. You get a directional move into the edge (2U into upper resistance, 2D into lower support), a potential outside bar (3) that pierces the boundary and runs stops, and then a reversal close that's confirmed by the next bar taking the opposite direction. The stop is clear. The target is clear. The logic is internally consistent.
The 1-1 Setup at Edges: The Sleeper Signal
Even more powerful — and far less discussed — is the 1-1 setup at an edge. When you see two consecutive inside bars form right at the upper or lower boundary of a broadening formation, the market is literally pausing at the most important line on the chart. The energy is coiling. When it breaks, it will break hard — and the edge tells you the direction of highest probability.
Multi-Timeframe Amplification
Everything described above operates on a single timeframe. But the real power emerges when you stack timeframes.
Weekly chart: Identify the broadening formation. Classify its type. Note which edge price is approaching.
Daily chart: Confirm the approach. Watch for a 1, 1-1, or 3 bar setting up at the edge. This is your “battle zone.”
4H / 1H chart: Look for your trigger sequence — the 2-2 reversal, the failed break, the 1-1 resolution. This is your entry timing.
The rule: Higher-timeframe formation + edge location overrides lower-timeframe noise. You are not trading the 1H candle — you are using the 1H candle to time an entry that a weekly chart setup just validated.
This is why formation trading at this level is fundamentally different from pattern matching. You’re not looking for a shape on a chart and making a trade. You’re synthesizing formation type, boundary slope, location within the formation, bar-type sequence, and timeframe alignment — all at once — to arrive at a confluence score that tells you whether a setup is worth taking and at what level of size and conviction.
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Part V: How TDL’s Formation Scanner and Execution Suite Automate This Process
What we’ve described above — identification, classification, location scoring, bar-type sequencing, multi-timeframe confluence — is a significant analytical workload. To do it manually across even 10–15 symbols simultaneously, on multiple timeframes, is a full-time job. And the brutal irony is that the best setups don’t announce themselves. You can’t stare at 20 charts and catch every 1-1 that forms at a key broadening edge on the weekly.
That’s the gap the TDL Formation Scanner was built to close.
TDL Formation Scanner — The Battlefield Intelligence Layer
The TDL Formation Scanner scans up to 20 symbols simultaneously across 14 pre-defined sector buckets — Tech Large Cap, Financials, Energy, Healthcare, Futures, ETFs, and more.
For every symbol in the bucket, it runs the complete Strat + broadening analysis:
Classifies the current bar type (1, 1-1, 2U, 2D, 3) on your selected timeframe
Detects all seven broadening formation types with boundary slope calculations
Determines directional bias from the formation geometry
Measures the symbol’s location within the formation: Upper Edge / Mid / Lower Edge
Runs a multi-factor scoring system (0–100) weighting bar type, formation bias, edge location, trend alignment, and momentum confluence
Outputs a ranked table sorted by trigger priority: TRIGGERED → READY → WATCH
The output tells you exactly which setups are highest quality right now — across an entire sector — without manually flipping through every chart.
Scanner output columns: Symbol · Bar Type · Formation · Location · Score · Bias · Confluence (★★★) · Status · Action
Status tiers:
🟢 TRIGGERED — Signal is live. Formation + bar sequence + location all aligned.
🟡 READY — Setup is approaching trigger. Worth monitoring closely.
⚪ WATCH — Formation identified, setup still developing.
⬜ WAIT — Middle zone or insufficient confluence. Stand aside.
TDL Trade Execution Suite — Entry. Stop. Target. Calculated Before You Click.
Once the Formation Scanner identifies and scores a setup, the Trade Execution Suite takes over for the individual symbol.
It overlays the broadening formation boundaries directly on your chart — visual lines showing exactly where the upper and lower edges are. It classifies the current bar live. It plots entry zones, ATR-based stop levels, and multi-target take-profit levels. And it shows you the risk/reward ratio in real time before you commit to the trade.
The suite also handles multi-timeframe automatically. When you select Weekly mode, it shows weekly bar types and weekly broadening boundaries. Switch to Daily, and the same framework adapts. The formation and the trade management system always speak the same language.
Dashboard shows: Setup type · Score · Signal status · Trend alignment · vs SPY relative strength · Regime (compressed/expanding volatility) · Entry · Stop · TP1 (50%) · Target (opposite edge) · Trade rationale
The Complete Workflow: From Scan to Trade
Step 1 — Select Sector + Timeframe in Formation Scanner Choose your universe (e.g., Tech Large Cap) and timeframe (Weekly for swings, Daily for shorter holds).
Step 2 — Review the Ranked Output Focus on TRIGGERED setups first, then READY. Filter by score — A and A+ only. Anything C or below in the middle zone: ignore it.
Step 3 — Check Formation Type + Location Alignment Is the formation bias aligned with the signal direction and location? A long signal at the lower edge of a DBW (bullish formation) = maximum bias stacking. A long signal in the middle of a neutral MF = pass.
Step 4 — Open the Individual Chart + Apply Execution Suite Click into the symbol. Add the Trade Execution Suite. Formation lines, entry zones, stops, and targets all populate automatically.
Step 5 — Wait for Trigger Confirmation Don’t jump early. Wait for the bar sequence to confirm. A 2U into the upper edge is an approach — not a signal. The 2D close after the approach is the signal. The discipline to wait for the signal bar separates clean execution from mechanical noise.
Step 6 — Manage to Targets Scale out at TP1 (typically the midpoint of the formation) and TP2 (the opposite edge). Trail the remaining position using bar-type logic — as long as bars keep resolving directionally, hold the trade.
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Part VI: What Most Traders Get Wrong
Let me close with the five most common mistakes traders make with broadening formations — because understanding the failure modes is as important as understanding the setup itself.
1. Trading the middle. The belly of the megaphone is where accounts go to die. Without edge location, you have no structural reference for your stop, no formation-derived target, and no bias. You are just trading noise with a catchy pattern name attached to it. If you’re not near an edge, you’re not in a broadening formation trade. You’re in a random trade.
2. Ignoring formation type. Not all broadening formations have the same bias. Shorting the upper edge of a Descending Right-Angled broadening (where the upper boundary is falling toward a breakout) is a very different trade than shorting the upper edge of an Ascending Broadening Wedge. Same location. Very different context. The formation type isn’t decorative — it’s directional information.
3. Skipping the trigger bar. Identifying a setup is not the same as taking a trade. A 2U into the upper edge isn’t a signal — it’s an approach. The short signal comes when you get the reversal close (2D) after the approach. Entering on the approach bar rather than the signal bar is the single biggest execution mistake in this method. You’ll get stopped out on the noise before the real move begins.
4. Ignoring the HTF context. A perfect broadening setup on the daily chart running directly into massive weekly resistance is not the same trade as one with the weekly formation also pointing in your direction. Multi-timeframe confluence doesn’t just improve probability — it changes the size, the target, and the conviction with which you hold through pullbacks.
5. Not accounting for formation age. Broadening formations eventually resolve. A megaphone that has seen 8–10 swings has likely been watched by enough participants that the eventual breakout will be significant and fast. Late-stage formation trades should account for the possibility of directional resolution rather than another mean reversion. The oldest setups inside the oldest formations are sometimes the best — but they also carry the highest risk of getting caught in the breakout when it finally comes.
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The Bottom Line
Broadening formations are not chaos. They are not patterns to avoid. They are liquidity structures — and once you understand them at this level, the market will never look the same.
You’ll see the megaphone on a weekly SPX chart and immediately know: where the edges are, what type it is, what the bias suggests, what bar sequence you’re waiting for, and exactly where your stop goes if you’re right or wrong.
That’s not luck. That’s a systematic, repeatable edge — grounded in The Strat’s pure price action logic, layered with formation geometry, and automated through the TDL Formation Scanner and Execution Suite so you can execute it consistently across an entire watchlist.
The market will keep forming megaphones. The question is whether you’re equipped to trade them.
Access the full TDL Indicator Suite → tradingdecisionslab.com
Formation Scanner · Trade Execution Suite · 8 additional indicators across 3 tiers. Built for futures, swing, and options traders who take price action seriously. Available via Whop.
Risk Disclaimer: This content is for educational and informational purposes only. Nothing in this post constitutes financial advice, a recommendation to buy or sell any security, or trading advice of any kind. Trading involves substantial risk of loss. Past performance and pattern identification do not guarantee future results. Always trade with capital you can afford to lose and use proper risk management.
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