Category: Trading Strategy

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How to trade using Ascending Triangle, descending triangle and symmetric triangle Patterns?

How to trade using Ascending Triangle, descending triangle and symmetric triangle Patterns?

Triangle Chart Patterns are commonly used continuation chart patterns and are easy to trade as it follows the original trend. It can be found in all the time frames. Triangle is formed when there is a pause in trend for few candles. There are two converging trend lines, Rising trend line and falling trend line which forms Triangle pattern. There are three types of Triangle chart patterns.
• Ascending Triangle pattern
• Descending Triangle pattern
• Symmetric Triangle pattern

Ascending Triangle Pattern
The Ascending triangle pattern is formed by a horizontal resistance line with a rising support trend line. When this pattern is formed in the ongoing uptrend, it can signal a very reliable continuation of the uptrend. If you see the below picture, the ascending triangle has horizontal resistance line with a rising support trend line. Price must touch the trend line by at least two times to form a valid pattern. Upside breakout happens when the price breaks out the horizontal resistance line.

Descending Triangle pattern:
The Descending triangle pattern indicates a move to the downside. This pattern is formed with horizontal support line followed by a falling resistance line. You can see the pink horizontal support line along with the declining resistance line. Downside breakout happens when the price breaks below the support line.

Symmetric Triangle Pattern
The Symmetrical triangle pattern is formed when you have both rising support trend lines and falling resistance trend lines. The breakout in this pattern is very powerful and unlike Ascending or Descending triangle, symmetric triangle pattern can give breakout in either side. So we need to be little cautious here and wait till we get confirmed breakout. Confirmed breakout happens when you get a price close above or below the breakout point in respective time frame.

We can normally identify the potential breakout by looking the previous trend. If the previous trend is up then the chances of an upside breakout is much higher. Similarly, if symmetrical triangle forms in down trend then the chances of downside breakout is higher. Still, it is always better to wait till the price closes above Breakout point to have authentic breakout.

How to trade using Flag Pattern effortlessly?

How to trade using Flag Pattern effortlessly?

Flag Pattern:
The flag is actually a continuation pattern and can be used to take breakout trades.

Bullish flag formations are found in stocks with strong uptrends. They are called bull flags because the pattern resembles a flag on a pole. The pole is the result of a vertical rise in a stock and the flag results from a period of consolidation.

After a steep rise in the stock price it will take sideways for sometime with small downside in price. This period is called consolidation and it is called Flag. The steep price increase is called a Pole. During the consolidation period stock is getting prepared for next up move.

Reverse is true for inverse flag formation, which can be used in downtrend.
One of the important factor during the flag breakout is a volume. We will see a sharp increase in volume when the breakout happens.

Flag formation:
The flag pattern forms what looks like a small channel either flat or sloping. The channel is formed by two parallel trend lines that act as support and resistance for the price until the price breaks out. In general, the flag will not be perfectly flat but will have its trend lines sloping

Time Frame
For positional trades use daily / Weekly / Monthly time frame and for intraday trading, you can use 3 min, 5 min, 15 min time frame. Longer the time frame stronger the breakout. When you use daily time frame ensure the breakout happens when the price closes above the trend line on a daily closing price basis. Same applies for weekly and monthly time frame.

How to calculate Target
The target is set based on the height of the Pole. Once flag or pennant gives price breakout above the trend line then we can expect it to achieve the height of the pole from the Breakout point.

Support levels
The flag top trend line becomes immediate support level after breakout and the bottom trend line is your final support. Keep the respective breakout candle low as immediate support. Weakness is shown once the price closes below the breakout point. But do not exit in panic. You can exit once the price closes below the bottom trend line of the flag.

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