Spotting chart patterns is a popular hobby amongst traders of all skill levels, and one of the easiest patterns to spot is a triangle pattern. However, there is more than one kind of triangle to find, and there are a couple of ways to trade them. Here are some of the more basic methods for both finding and trading these patterns.
What is an ascending triangle?
The ascending triangles form when the price follows a rising trendline. However, the trend consolidates, failing to make new highs.
Ascending triangles are considered to be continuation patterns. Therefore, a break of the resistance prompts a rally.
The pattern is negated if the price breaks below the upward-sloping trendline.
How can you trade ascending triangles?
Typically, you want to buy after the pattern breaks resistance. It is good practice to set a stop-loss just below the last significant low.
What is a descending triangle?
Not surprisingly, the descending triangle is the opposite of the ascending triangle. It forms when the price follows a downward trendline and then consolidates, failing to make new lows or break a downward trendline.
Descending triangles are considered continuation patterns. Therefore, a break in the support prompts the price to fall.
The pattern is negated if the price breaks the downward-sloping trendline.
How can we trade descending triangles?
It is good practice to set a stop-loss just below the last significant high.
What is a symmetrical triangle?
The pattern is identified by two discrete trendlines. The first trendline connects a series of lower peaks, while the second trendline connects a series of higher troughs.
Symmetrical triangles generally form during consolidation and the volatility tends to decline as the pattern progresses.
Symmetrical triangles tend to be neutral and can signal either a bullish or a bearish situation. Therefore, a breakout from the pattern in either direction signals a new trend.
How can we trade symmetrical triangles?
If a bias upon the conclusion of the pattern is pointed higher, we look for an opportunity to buy the pair.
Typically, you want to buy after the pattern breaks resistance