How To Trade Triangle Chart Patterns?
Before we continue further on how to trade with triangle chart patterns, it’s good to know in advance about what a triangle is?
In a technical analysis on forex trading, the triangle pattern is one pattern that is very popular among traders. This pattern usually signals a continuation of the old trend, and if you can recognize it, it can be very helpful in observing price action. What is a triangle pattern?
The triangle pattern described as a horizontal trading pattern. At the beginning of its formation, the triangle is at its widest position.
Then the trading range narrows as the market moves sideways. and that’s the points form a triangle are formed.
In the chart, the bottom line on the triangle represents support, while the upper line of the triangle represents overbought.
Where investors will draw profits.
There are three types of triangle patterns that are widely known by among trader,
- the ascending triangle
- the descending triangle
- and the symmetrical triangle.
Ascending Triangle Pattern
An ascending triangle pattern is a triangle formation consisting of a strong resistance level and a slope line from low levels that meet at a point so that the pattern resembles a triangle. In this formation, the price appears to form higher lows and move closer to the resistance level.
In this condition, the seller stays at a certain selling price while the buyer buys at a higher price.
So that the price gets closer to the selling price.
If the buyer’s price is almost the same as the seller’s selling price, then the direction of price movements will immediately breakout or break one of the resistance levels or the low-level slope line.
In many cases prices maybe break the resistance level where buying sentiment is indeed stronger than selling sentiment so prices continue to rise and break the seller’s maintained level.
Especially if the situation before the formation of this pattern prices tends to move uptrend.
In this case, the triangle pattern shows a trend continuation.
But not infrequently the resistance level is too strong and the buyer cannot break the level.
This situation is due to the decreasing buy sentiment or the number of sellers increasing.
So that the price moves through a low slope line and then moves bearish.
Example Ascending Triangle Pattern
In the picture above, we can see that an uptrend is going on.
The bottom trend line in the picture above follows support levels that continue to rise.
While the two high levels form the top trend line. The high level that forms the upper trend line does not have to reach the exact price level but must be close to each other.
At first, buyers in the market may fail to break the upper trend line and need time to try to break through that level, before finally being able to form a new high level.
Traders who observe this pattern can monitor trading volume as an indication that a new high level will be formed.
When a trader opens a position? most traders will open positions once price action breaks the upper line of the triangle along with an increase in volume.
Example Ascending Triangle and How to trades
In this pattern, we also cannot determine the direction of the breakout with certainty, but believe a breakout will occur.
So that it can take advantage by opening a buy stop position above the resistance level and sell stop position below the low-level slope line.
In the example above there is a breakout in the direction of the low-level slope line and the sell stop order is executed. Just like before, the target level or take profit in pip is determined by the height of the triangle (x).
Descending Triangle Pattern.
This pattern is the opposite of the ascending triangle. A descending triangle is a triangle formation consisting of a strong support level and a slope line from high levels that meet at a point so that the pattern resembles a triangle.
In this formation, the price forms lower highs and moves closer to the support level, which indicates a lower selling price while the buying price holds at a certain level.
When the seller’s selling price is almost the same as the buyer’s price.
Then the direction of the price movement will immediately breakout or break through one of the support levels or the slope level high line.
Like as with the ascending triangle pattern.
In many cases, the price maybe breaks the support level where selling sentiment is stronger than buying sentiment.
But not infrequently the support level is too strong and the buyer cannot break it due to the decreasing selling sentiment
Or the increasing number of buyers so the price moves through the high slope level and moves bullish.
Example Descending Triangle Pattern
The two low levels in the picture above form a support line on the triangle pattern.
Even in this pattern, the price points that form a low level do not have to be exact.
Large volume trading plays an important role in signaling a price breakout out of the triangle towards the bottom (bearish).
Example Descending Triangle Pattern and How to Trade
Just like the way of trading the previous ascending pattern.
We open long positions above the high-level slope line and sell stop positions below the support level.
In this example, there is a breakout in the direction of the high-level slope line so that the buy stop order is executed.
Just as before, the take profit level is determined by the height of the triangle (x).
Symmetrical triangle pattern
A symmetrical triangle pattern is a formation where the slope of the high levels and the slope line of the low levels meet at a point.
So that the pattern resembles an equilateral or symmetrical triangle.
In this formation, it seems that prices move to form lower high levels (lower highs) and higher low levels (higher lows).
In this case, the buyer and seller are in a consolidation time where the buyer buys at a higher price and the seller sells at a lower price.
iF both slope lines almost meet then the direction of the price movement will immediately breakout or breaks one of the two slope lines.
In this pattern, we cannot determine a definite breakout direction but believe a breakout will occur.
So we can take advantage of opening buy positions above the high-level slope line.
And sell positions below the low-level slope line, by pending buy stop and sell stop orders.
Example Symmetrical Triangle Pattern
In uncertain market conditions, high levels and low levels appear in two lines resembling funnels, without any significant changes in trading volume.
The investor does not know what position to take. Often, breakouts occur in the direction of an ongoing trend at a larger timeframe.
However, if you are looking for an entry point to open a position after the symmetrical triangle pattern is formed.
Then it is better to do so after the breakout point appears or it can also be with a pending buy stop and sell stop pending strategies.
Example Symmetrical Triangle and How to Trade
In the example image above there is a breakout in the direction of the high-level slope line so that the buy stop order is executed.
In this case, the sell stop order can be canceled immediately, it can be manually The target level or take profit in pip is determined by the height of the triangle (x) according to structure the market
Trading with triangle chart patterns is very good if we can discipline with rules trading
But of course, no perfect trading analysis, trading based with triangle chart patterns also like as trading with another strategy.
We always need proper money management, and also about risk management very crucial in trading, to learn more about forex trading strategies actually there are so many sources out there, like as on babypips