How to trade using Ascending Triangle, descending triangle and symmetric triangle Patterns?
Today we are going to learn about Triangle pattern
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.
For all these patterns, volume is important. When the breakout happens we should have big volume spike.
Important points to remember in Triangle patterns:
- Triangle patterns are continuous pattern, hence we need to have a stronger established prior trend either uptrend or downtrend. The prior trend should be at least a few candles old and the triangle pattern marks a consolidation period before resuming its prior trend
- We need to have at least 2 points to draw a trend line and 2 Trend line points to form a Triangle pattern
- During the consolidation period, volumes will be thin or reduced which indicates a calm before storm. When the price gives breakout above the trend line you will see the big volume
- Always wait for the price to give clear breakout before entering the trade. Price must close above the breakout point on a closing basis as per the time frame we are drawing the pattern
- Normally after breakout, the price tends to retest the breakout point and starts its journey again
- Target can be calculated based on the widest point of the triangle as given in the example. The height of the widest point is the target from the breakout point
For more details and examples, checkout the video: https://youtu.be/PEFj-0t3900