Chart patterns · Advanced

Broadening Formations (Megaphone Pattern)

Higher highs and lower lows at the same time, and a stop that grows with every swing.

Last reviewed 15 September 2026 by the MarketPro research desk · Editorial policy

In short

A broadening formation, or megaphone, is the inverse of a triangle: the trendlines joining swing highs and swing lows diverge, producing higher highs and lower lows at the same time. It shows volatility expanding and neither side holding control. Because each new extreme redraws the boundaries, its lines and measured objectives are less reliable than those of converging patterns.

What to remember

Constant risk forces a shrinking position. As swings widen from 60 to 140 pips, a 50 dollar risk budget cuts the position by more than half.
Every new swing redraws the boundary, so the lines are running estimates rather than levels.
The same shape is produced by a dense news calendar or thin holiday liquidity, and neither is a structural signal.
The most useful response is usually not a trade at all: fewer positions, smaller size, stops matched to the current range.

Lesson 16 of 22 in Chart patterns

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A broadening formation, or megaphone, is the opposite of a triangle: the lines connecting the swing highs and the swing lows diverge instead of converging. Price makes higher highs and lower lows at the same time. It is a picture of a market becoming progressively more volatile and less controlled, and the single most important consequence is that your position size has to fall as the pattern develops.

Expanding swings shrink your position

Every other chart pattern in this category gives you a stop that is stable or shrinking. A broadening formation does the opposite, and the arithmetic is unforgiving.

Suppose GBP/USD makes a swing of 60 pips, then one of 95, then one of 140. If you fade the upper boundary on the third swing, the stop that respects the structure has to sit beyond the most recent high, and the next swing could plausibly be 200 pips. Holding risk constant at 1 percent of a 5,000 dollar account, 50 dollars, your position falls from about 0.08 lots at a 60 pip stop to 0.05 at 95 pips to 0.03 at 140, once each is rounded down to a tradeable step. Same account, same risk budget, well under half the position. That is not a suggestion, it is what keeping the risk constant requires, and the position size calculator makes the reduction concrete.

Most of the damage done with megaphones comes from ignoring that step. Traders keep the size they used when swings were 60 pips wide, and the pattern hands them a 140 pip adverse move.

Why the boundaries are the least reliable lines on the chart

In a triangle, each new swing falls inside the previous ones, so your lines get confirmed. In a broadening formation, each new swing exceeds the previous ones, so every new extreme redraws the boundary you were trading against. A line that is redefined by the next swing is not a level, it is a running estimate.

This is also why measured objectives are weaker here than anywhere else. The projection convention is to take the height of the pattern and extend it from the break, but the height is increasing as you measure it, so the target moves depending on when you take the reading. Treat any number produced this way as a very rough area rather than a level to plan around.

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When these appear

Around major turning points. Broadening formations are associated with market tops and periods where opinion is unusually divided, when large moves in both directions reflect genuine disagreement rather than noise.
Through dense news periods. A run of high-impact releases, a central bank meeting and a geopolitical headline in the same fortnight will produce this shape without any of the sentiment story attached.
In thin liquidity. Holiday periods and year-end can widen swings simply because there is less depth in the book, which looks identical and means nothing.

Distinguishing the three matters, because only the first is a structural read. The other two are conditions that will pass, and trading them as patterns means trading a calendar artefact.

A practical test separates them. Check whether the widening swings line up with dated events on the economic calendar. If each new extreme arrives on a release or a policy decision, you are looking at a calendar, not a chart pattern, and the shape will close up again as soon as the schedule thins out.

Two diverging lines fit almost any volatile chart

The primary failure is that there is often no pattern at all. Two diverging lines can be drawn across almost any volatile stretch of chart, and unlike a flat top or a horizontal support level, nothing anchors them. The discipline is the same as elsewhere, two clean touches per line minimum, but it bites harder here because each touch is further from the last.

The second is that the expected resolution is genuinely unclear. Analysts watch for a decisive break of one boundary, but in an expanding structure a break of the boundary is what the pattern does by definition on every swing. The distinction between a new extreme and a breakout is a judgement call, and when a pattern's core signal requires a judgement call, it is doing less work than it appears to.

The response is smaller size, not a better entry

The most valuable response to a megaphone is usually not a trade. When you recognise expanding swings, the practical actions are to cut position size, set the stop on a new trade from the range the market is in now rather than the one you are used to, reduce the number of positions open at once, and be more selective about which setups you take at all. Those are the same responses volatility asks for generally, set out in risk management.

If you do trade it, trade the swings rather than the boundaries, take objectives earlier than the structure suggests, and size from the current swing width rather than the one you remember. A market whose range has doubled is a different instrument from the one you were trading a fortnight ago, even though the symbol has not changed. Broader context on how expanding volatility changes the cost of every trade sits in how forex prices move.

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Written and reviewed by the MarketPro research desk

MarketPro is a trading-signal and trading-education app operated by Harajuku Holdings LTD (Cyprus). Our signal desk publishes and tracks every trade idea in-app, and every page here is checked against the app's live behaviour before publishing. Last reviewed 15 September 2026. How we produce signals and content · About MarketPro

FAQ

Broadening Formations (Megaphone Pattern): questions

What does a broadening formation indicate?

It indicates expanding volatility and an unusually divided market, where neither buyers nor sellers are holding control and each swing travels further than the last. It is associated with major turning points and periods of heightened uncertainty. It is also produced mechanically by a dense run of high-impact news or by thin holiday liquidity, so the context matters more than the shape.

How do you trade a megaphone pattern?

Carefully, and smaller than usual. Because the boundaries move as the pattern develops, the more workable approach is to trade the individual swings with objectives taken earlier than the structure suggests, sizing from the current swing width rather than an earlier one. Many experienced traders treat a megaphone as a reason to reduce exposure rather than as a setup, since the risk required to hold a position through an expanding range grows with every leg.

Is a broadening formation bullish or bearish?

Neither on its own. The pattern makes higher highs and lower lows simultaneously, so it contains evidence for both sides by construction. Analysts who assign it a bearish reputation are usually referring to its appearance near major equity tops, which is a context-specific observation rather than a property of the shape. Treat it as a volatility statement, not a directional one.

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