In technical analysis, recognizing patterns on a chart is very important. One way to do this is by using triangle patterns.
In technical analysis, recognizing patterns on a chart is very important, one way to do this is by using triangle patterns. Triangles are one of the most useful portrayals of decreasing price volatility on price charts, and somehow can be found everywhere because they are easily recognisable.
There are three types of triangle patterns: ascending, descending and symmetrical.
1. Ascending Triangle
An ascending triangle generally signifies bullish signal; on some occasions, it may represent continuation or reversal patterns. Ascending triangles indicate the price is moving higher. The pattern is formed by two trendlines; the horizontal being the resistance line and an ascending trendline being the support. If the ascending triangle is formed while there is an uptrend, it can be considered a continuation of the previous pattern. However, if it is formed while there is a downtrend, it can be considered a reversal pattern.
2. Descending Triangle
Descending triangles are the opposite of ascending triangles, representing bearish signal, although it also may signify continuation or reversal patterns. Descending triangles indicate that price is moving lower. The pattern is formed, once again, by two trendlines; the horizontal being the support line and the descending trendline acting as the resistance. If the descending triangle is formed while there is an downtrend, it can be considered a continuation of the previous pattern. However, if it is formed while there is an uptrend, it can be considered a reversal pattern.
3. Symmetrical Triangle
The symmetrical triangle is mostly considered a continuation pattern. It is formed by the coming together of a descending resistance line and an ascending support line, joining a series of lower highs and higher lows.
How to trade using these triangles
After recognizing triangle patterns, here is some tips on how to trade with them.
- Make sure each side of the triangle has already been touched at least twice.
- Be careful of first breakouts- they usually fail.
- Trade according to the price movement- if the triangle is broken in a particular trend movement buy or sell accordingly.
- Set the profit target according to the time frame being used.
Rico FY