How to Trade Triangle Chart Patterns?
FX Signals – Information is not investment advice
What is a triangle pattern?
A triangle chart pattern is a consolidation pattern that involves an asset price moving within a gradually narrowing range. Triangle patterns visualize the battle between buyers and sellers in the market. Despite this battle, triangle patterns generally signal the continuation of a previous trend, so traders tend to wait for the price to break out of the range to enter a trade.
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Live How to Trade Triangle Chart Patterns?
How to Trade Triangle Chart Patterns
If the trend lines start far apart but later converge, the pattern you see is indeed a triangle chart pattern.
In this article, you will learn about the different types of triangle patterns, how to identify them on a chart, and what trading strategies you can use if you spot a triangle pattern on a chart.
Fx Triangle patterns
Symmetrical triangle
The first type of triangle pattern we’ll discuss is a symmetrical triangle. Let’s take a look at the chart below.
This is an example of a typical symmetrical triangle pattern. As you see, this pattern looks very prim and proper, with both trend lines coming together at a similar slope. This pattern is often used as a common example of triangle patterns because it forms a very clear and recognizable shape.
Ascending triangle
The next type of triangle patterns we’re going to look at is an ascending triangle. Ascending triangles differ from symmetrical triangles in that only their bottom side is sloping. The upper side of an ascending triangle, drawn through the peak of the formation, remains horizontal, signaling that bear resistance stays the same despite the advance of the bulls.
Typically, this pattern occurs after a very clear uptrend, which you can identify by the rising nature of its support line. It continues its climb and eventually converges with the static resistance line, breaking through it and resuming the previous uptrend.
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Apart from identifying the future direction of price movement, ascending triangles can also indicate the best time to enter or exit trades, so spotting them on a chart means finding new opportunities for profitable trades.
Descending triangle
A descending triangle is the complete opposite of an ascending triangle pattern.
Though both descending and ascending triangles usually signal the beginning of a downtrend and an uptrend respectively, it’s still possible for the price to bounce off the horizontal trend line, resulting in the reversal of a previous trend. So most of the time it’s better to wait until the pattern is complete before making any trading decisions.
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Trading with triangle patterns: key points to remember
The most common strategy for trading triangle patterns is to wait for a price breakout and then enter a trade in the direction of the market movement.
Triangle patterns: trading strategies
If you spot a triangle pattern on your chart, the general advice is to wait until the price breaks out.
Symmetrical triangle trading strategy
As we already learned, symmetrical triangles can occur both in bullish and bearish markets. Both bulls and bears have equal positions, so the price can end up moving in either direction.
What you can do in this case is to place entry orders just above the resistance line and below the support line. This way, you will automatically enter the trade without worrying about the direction in which the market moves next. Or alternatively, you can wait for the breakout to see where the price ends up moving and then go with the flow.
Ascending and descending triangles trading strategy
Both ascending and descending triangles occur within bullish and bearish trends respectively and are usually considered continuation patterns, meaning that after the breakout, the market will continue moving in the same direction as before the pattern occurred.
However, this is not always the case. The price may bounce off one of the trend lines and reverse the trend altogether. Taking this into consideration, it’s obvious that the safest course of actionwhile trading these patterns is to wait for a breakout and go with whatever direction the price moves next.
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