How to Trade Triangle Chart Patterns Like a Pro

An ascending triangle implies the formation of an upper price resistance, at which at least two points touch at a short distance from each other. As well as the formation of rising lows between these points, there is a support level sloped up. Technical analysis requires a great deal of practice and patience. This is true of any type of trading tool used in this strategy, including triangle chart patterns. Technical analysis is a trading strategy that relies on charting the past performance of a stock or other asset to predict its future price movements.

1. Later on the price breaks through the lower level and completes the size of the pattern (pink arrows).
2. An ascending triangle happens when a financial asset is moving higher but then finds resistance.
3. As price rallies, it finds resistance and begins to erase some of its gains.
4. Also, the two sides of the triangle are inclined with the same angle.
5. They may drop slightly below this line before the breakout continues, but a significant drop below the resistance line signals that the breakout may have failed.

The red target is the first one, which is as big as the size of the pennant. The green target corresponds to the size of the previous up move, which should be applied starting from the upper side of the pennant. While this price is the target, many people tend to be highly conservative. If you traded this one perfectly, you could have made between 22% (buying at B) to 17% (entering at the open the day after C). In late February, the market faltered, but the stock waited until March to weaken. Nevertheless, it too, tumbled and then moved sideways until finding firmer ground in May.

The price may briefly break above the resistance line only to fall back within the triangle, leading to potential losses if the trader enters prematurely. Volume dynamics in the ascending triangle provide additional confirmation for trades. An increase in volume during the breakout reinforces the validity of the pattern, giving traders more confidence in their positions. While the ascending triangle is typically bullish, there are scenarios where it can signal bearish trends, especially if the breakout fails. There is less risk involved by waiting for the confirming breakout. Buyers can then reasonably place stop-loss orders below the low of the triangle pattern.

Essentially, the ascending triangle pattern forms when the price struggles to break above a resistance level, but buyers keep pushing it higher, creating higher lows. It is important to emphasize that the ascending triangle is a growth pattern, which usually means an uptrend continuation. It appears at the high of an uptrend and means the price movement reversal downwards. Ascending triangles are most reliable when found in an uptrend. The horizontal line gets more distinct, and the ascending triangle pattern is more reliable when there are more swing highs.

Symmetrical Lines

1. A minimum of two swing highs and two swing lows are required to form the ascending triangle’s trendlines.
2. Sometimes the resistance level is too strong, and there is simply not enough buying power to push it through.
3. Traders should consider the potential bearish signals of the ascending triangle pattern to reduce the risks involved before trading.
4. Price information is often visualized through technical charts, but traders can also benefit from data about the outstanding orders for a stock.
5. Price continues climbing to E, which isless than 10% above the highest peak in the triangle.
6. For the pattern to form, this resistance area should be tested several times.

Pennants on the chart have a similar shape to that of symmetrical triangles. They typically appear during trends and have a trend continuation character. While it is primarily a continuation pattern, it can sometimes signal a reversal when it appears at the end of a downtrend. A standard take-profit target equals the size of the largest part of the setup and is measured just from the breakout trendline.

I just wanted to make sure I could find a clear example that everyone would read and nod their head to. The next thing you want to see in a breakout is for volume to ascending triangle pattern accelerate on the move higher. This does not mean the volume on the breakout has to be the highest over the last 20 hours or something. Now, this does not mean to say the ensuing breakout or breakdown doesn’t deliver on the hype.

Advantages of Trading on the Ascending Triangle Pattern

This strategy uses tools and techniques to evaluate historical data, including asset prices and trading volumes. Some of the tools used include charts and graphs such as triangles. Traders should consider the potential bearish signals of the ascending triangle pattern to reduce the risks involved before trading. Ascending triangle pattern is one of the three primary triangle patterns, along with the symmetrical triangle pattern and descending triangle pattern. A bearish signal, the pattern is normally observed as a continuation pattern in a down-trend but can be a powerful reversal signal when encountered in an up-trend.

Advantages of the triangles pattern

The narrow width of the ascending triangle at the moment of completion makes the stop-loss relatively small, making an ascending triangle a high reward-to-risk trade. In this case, the price ended up breaking above the top of the triangle pattern. They keep putting pressure on that resistance level and as a result, a breakout is bound to happen. 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. This helps in the scenario where the stock rolls over and breaches the uptrend line, but does not break the low of the breakout candle.

This ascending trendline shows that buyers are slowly pushing the price up, which provides further support for a bullish trading bias. Similarly, in a descending triangle, you should place a sell-stop below the support level. For a symmetrical triangle, you should have a buy and sell stop at key support and resistance levels. The ascending triangle pattern when bulls start to worry about the upward direction of the asset.

Let’s consider the classic trading method in the formation of the ascending triangle pattern on the example of the EURUSD daily chart. The upper trendline must be horizontal, indicating nearly identical highs, which form a resistance level. The lower trendline is rising diagonally, indicating higher lows as buyers patiently step up their bids. For trading purposes, an entry is typically taken when the price breaks out. Buy if the breakout occurs to the upside, or short/sell if a breakout occurs to the downside. A stop loss is placed just outside the opposite side of the pattern.

Enter the trade when the breakout occurs with increased volume. High volume during the breakout signals strong buying interest and increases the likelihood that the upward move will continue. Let us consider an example of an ascending triangle pattern in the daily chart of Apple Inc. stocks.

Any price action reflects the current psychological state of the market, or rather the psychology of traders. It is not difficult to detect an ascending triangle in the chart since the contour of a right-angled triangle located horizontally is visually clearly traced. Technical tools are used to make predictions about future trends based on past performance. But remember that the market can be very unpredictable and can swing in any direction at any time. Despite being a continuation, traders should look for breakouts before they make a move to buy or sell. Traders must consciously consider these limitations of the ascending chart pattern and trade to avoid losses.

Usually, traders watch for a move below the lower support trend line as it suggests that the downward momentum is building and a breakdown is coming. Once the breakdown occurs, traders enter into short positions and aggressively help push the price of the asset even lower. In the previous sections, we have shown you how to draw the three types of triangles.

A minimum of two swing highs and two swing lows are required to form the ascending triangle’s trendlines. But a greater number of trendline touches tends to produce more reliable trading results. When the upper and the lower level of a triangle interact, traders expect an eventual breakout from the triangle. As such, many breakout traders use triangle formations for identifying breakout entry points.