A broadening formation is a chart pattern that is formed when the price of a currency pair sees increasing price action without a clear direction. The currency pair may see its value swing up and down, but no trend is established.
A broadening formation starts in a relatively tight range and continues to fan out, making a shape like a triangle with the apex to the left (early in the chart) and the base expanding out. For this reason, a broadening formation is also referred to as a megaphone.
Broadening formations are common in the periods immediately before and after news or economic releases. During this period, some retail and institutional traders react to the news by adjusting their trades, but the trend or overall market reaction to the event takes time before it is truly established.
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