Why the US Dollar/Swiss Franc Broadening Formation is the Hidden Goldmine Traders Overlook

The Chart Pattern That’s Laughing at Your Stop Losses

If you’ve ever felt like the market is personally out to get you—stopping you out by a pip before reversing in your direction—congratulations! You’ve just encountered the broadening formation. This pattern doesn’t just fake out traders; it does it with style, like a market maestro conducting a symphony of liquidation.

But here’s the kicker: while most traders get trapped chasing false breakouts, smart money is exploiting this chaos for massive gains. The USD/CHF (US Dollar/Swiss Franc) broadening formation offers one of the most overlooked yet highly profitable opportunities in Forex.

Let’s dig into the hidden dynamics of this wild beast and uncover how you can capitalize on its erratic moves—without losing your sanity.

What Exactly is a Broadening Formation?

The broadening formation, also known as a megaphone pattern, is a price pattern characterized by higher highs and lower lows, forming an expanding triangle. It screams uncertainty and volatility, which is why retail traders tend to avoid it like a bad haircut.

Why Does It Form?

1. Liquidity Traps – Smart money needs volatility to fill their positions at the best price. By expanding price ranges, they shake out weak traders and hunt stop losses.
2. Market Confusion – Economic uncertainty and mixed data often cause price whiplash, creating these erratic swings.
3. Institutional Accumulation/Distribution – Broadening formations are often where institutions load up or distribute orders—think of it as the calm before a massive storm.

Key Characteristics of a USD/CHF Broadening Formation:

• Higher highs and lower lows
• Expanding price action with increasing volatility
• False breakouts in both directions

The Ninja Approach: Trading the USD/CHF Broadening Formation

Instead of getting faked out by market noise, let’s turn the tables and use the chaos to our advantage. Here’s how:

1. Wait for the Third Touch Rule

The first few swings in a broadening formation are unreliable. But once price touches a key level three times (either resistance or support), expect the next move to be the real deal.

???? Example: If USD/CHF has made two failed attempts at breaking higher, the third attempt is where institutions often step in for a decisive move.

2. Fade the Breakout, Enter on the Retest

Since broadening formations thrive on false breakouts, one of the best strategies is to fade breakouts and enter on the retest.

• If price breaks above resistance but struggles to hold, wait for it to drop back inside the formation—then enter short.
• If price breaks below support and quickly reverses, it’s a signal to go long.

???? Pro Tip: Use Volume Profile to identify key liquidity areas where institutions are placing their bets.

3. Follow Smart Money: Watch Institutional Footprints

Retail traders get slaughtered in broadening formations because they focus on price action alone. But if you track institutional footprints, you can anticipate their moves.

• COT Reports (Commitments of Traders) – Are hedge funds increasing their long or short positions on USD/CHF?
• Order Flow Data – Where are the big money orders sitting? (Hint: It’s rarely where retail traders place theirs.)
• Economic Reports – Swiss National Bank (SNB) interventions or U.S. inflation data can act as triggers.

???? Example: If SNB signals intervention due to a strong franc, USD/CHF will likely spike unpredictably—an ideal environment for broadening formations.

4. Use Time-Based Entries (Not Price-Based Ones)

Many traders obsess over exact price levels. But in a broadening formation, time matters more than price.

• Look for price reversals near major session opens (London, New York)
• Monitor how long price consolidates before making its next expansion
• Time your entries near high-impact news events to ride momentum

???? Example: USD/CHF often makes major moves during U.S. CPI releases. If the pattern is forming before the announcement, expect fireworks.

Advanced Tactics: How to Stack the Odds in Your Favor

1. Pair it with Divergence Signals

Since broadening formations create extreme highs and lows, divergences between price and indicators (like RSI or MACD) can signal exhaustion.

• If price makes a higher high, but RSI makes a lower high → bearish reversal signal
• If price makes a lower low, but MACD turns bullish → buy signal

2. Scale in with Dynamic Position Sizing

Broadening formations are volatile—so going all-in at once is a disaster waiting to happen. Instead, scale in gradually:

• Open a small position on the first signal
• Add more only if price confirms your direction
• Use trailing stops to lock in gains

???? Example: If USD/CHF fakes a breakout, enter with a small position and add more once price returns inside the range.

Final Thoughts: Why Broadening Formations Are a Goldmine for Smart Traders

Most traders fear broadening formations because they look chaotic. But this very chaos is what makes them profitable—if you know how to play them right.

Key Takeaways:

✅ Wait for the Third Touch Rule – Fakeouts are common, but the third attempt is often real.

✅ Fade Breakouts, Enter on Retests – Institutions push price past key levels before reversing.

✅ Follow Smart Money – Use COT reports, order flow, and economic news for confirmation.

✅ Time Your Entries Strategically – Price moves align with market opens and major news.

✅ Pair with Divergences & Scale in Smartly – Don’t rush, let the market reveal its hand.

By applying these strategies, you’ll transform a once-intimidating pattern into a high-probability trading setup. The next time you see a broadening formation on USD/CHF, don’t panic—capitalize on the chaos.

—————–
Image Credits: Cover image at the top is AI-generated