How to Trade Triangle Chart Patterns

A triangle chart pattern involves price moving into a tighter and tighter range as time goes by and provides a visual display of a battle between bulls and bears.

Trend Following Trading Strategy Guide

The triangle pattern is generally categorized as a “continuation pattern”, meaning that after the pattern completes, it’s assumed that the price will continue in the trend direction it was moving before the pattern appeared.

A triangle pattern is generally considered to be forming when it includes at least five touches of support and resistance.

Trading Guides: Identifying Chart Patterns in Forex Trading

For example, three touches of the support line and two for the resistance line. Or vice versa.

Just like there are three little pigs, there are three types of triangle chart formations: symmetrical triangle, ascending triangle, and descending triangle.

How to Trade Triangle Chart Patterns?

Symmetrical Triangle
A symmetrical triangle is a chart formation where the slope of the price’s highs and the slope of the price’s lows converge together to a point where it looks like a triangle.

What’s happening during this formation is that the market is making lower highs and higher lows.
This means that neither the buyers nor the sellers are pushing the price far enough to make a clear trend.

If this were a battle between the buyers and sellers, then this would be a draw.

How to Trade Bearish and Bullish Pennants

This is also a type of consolidation.

How to Trade Triangle Chart Patterns

In the chart above, we can see that neither the buyers nor the sellers could push the price in their direction. When this happens we get lower highs and higher lows.

As these two slopes get closer to each other, it means that a breakout is getting near.
We don’t know what direction the breakout will be, but we do know that the market will most likely break out. Eventually, one side of the market will give in.

Chart Patterns vs. Candlesticks Patterns

So how can we take advantage of this?

Simple.

We can place entry orders above the slope of the lower highs and below the slope of the higher lows of the symmetrical triangle.

Since we already know that the price is going to break out, we can just hitch a ride in whatever direction the market moves.

How to Trade Triangle Chart Patterns

Ascending Triangle
An ascending triangle is a type of triangle chart pattern that occurs when there is a resistance level and a slope of higher lows.

What happens during this time is that there is a certain level that the buyers cannot seem to exceed. However, they are gradually starting to push the price up as evidenced by the higher lows.

Descending Triangle
As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!).

In descending triangle chart patterns, there is a string of lower highs that forms the upper line. The lower line is a support level in which the price cannot seem to break.

Asia FX dips, dollar steadies as Fed uncertainty mounts