Ascending or descending triangle pattern: how to spot and use in trading

Confirming breakouts with secondary indicators like relative strength index or moving averages can provide additional confirmation. For instance, if RSI supports the direction of the excursion (e.g., RSI above 50 on an upward breakout), it strengthens the validity of the move. Triangle patterns can act as continuation or reversal signals, depending on whether the breakout aligns with or opposes the current trend. Inverse to the ascending triangle, the descending triangle is visible when the market is bouncing from support but it is unable to make higher highs. While you can trade various triangle patterns discussed in this article as a standalone system, it works best in combination with other technical strategies. In fact, integrating triangle patterns is a great way to improve the accuracy of any trading system.

1. A valid descending triangle probably indicates a downward trend, so prepare to sell the asset.
2. A triangle pattern forms when the price of a currency pair moves within converging trendlines, creating a triangular shape on the chart.
3. This strategy helps to reduce risks in case of a sharp change in price direction.
4. However, since false breakouts can occur, traders must employ risk management techniques, such as setting stop-loss orders or adjusting position sizes, to protect against unexpected reversals.
5. The price movement along the pattern is determined by its height, that is, from the low point of the support level to the high point of the resistance level.

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In addition to the breakout point, traders may consider the vertical distance of the triangle to project potential profit targets. By measuring the distance between the descending upper trendline and the flat lower trendline, traders can estimate the triangle pattern forex potential downward movement after the breakdown. This projection can be used to set take profit levels and manage reward potential relative to risk.

As you can see on this chart, a descending triangle mirrors its counterpart and has one sloping and one horizontal trend line. This pattern shows that it is the bears who keep advancing on the bulls, who, from their end, can’t seem to offer adequate support to counteract the impending resistance. In the end, the bears usually break the support line, signaling the end and confirmation of the triangle and the continuation of the previous downtrend. To identify a “Symmetrical triangle” on a chart, you need to find converging trend lines. One line should connect the descending highs, and the other should touch the ascending lows.

While ascending triangle patterns occur in markets trending to the upside, price is often expected to eventually break out to the upside in continuation of the underlying uptrend. The first one is fake signals – the price can break above the resistance, but the market won’t keep rising, moving below the resistance level. As we have mentioned, bulls can lack the force to push the price above the resistance. Although you can find the ascending triangle at any timeframe and for any asset, it’s a rare pattern. Unlike an ascending or the descending triangle pattern, a symmetrical triangle pattern has no horizontal support or resistance lines.

1. A stop loss can be placed a few pips below the triangle to reduce the risk on the trade.
2. Symmetrical triangles can break in either direction, with trades placed based on the breakout direction.
3. Check out types of continuation patterns and read about bullish and bearish continuation candlestick patterns on the FX2 Blog.
4. The price fluctuates within a range, reflecting a temporary uncertainty in the market.
5. Reversal patterns are often not followed by trend reversals, and continuation patterns are often followed by breakouts up or down.
6. You should consider using the educational resources we offer like  CAPEX Academy or a demo trading account.

Later on, we will tell more about the differences between ascending and descending triangles. These patterns are formed when the price of an asset moves within a narrow range, creating a triangular shape on the chart. Traders use triangle patterns to predict potential price swings based on the triangle type and the breakout’s direction. The symmetrical triangle can provide either a continuation or reversal signal, while the pennant typically signals a trend continuation. This is the case whether price is trending downward or upward before it enters the consolidation. The battle between buyers and sellers results in prices successively traveling less distance up and down and reversing direction more quickly as the pattern progresses.

That is, the highs remain at the same level while the lows increase, “pressing” the price to the upper border. After that, there is an upward impulse breakout and the destruction of the counter resistance. Momentum gives confidence to market participants and signals a continuation of an uptrend line or a bearish trend reversal. Triangle is a widely recognised chart pattern defined by two converging trend lines. This article will teach you how to spot different types of triangles and which trading strategy to apply for each of them after the breakout.

How to Trade Triangle Patterns in Forex

Learn everything you need to know about funded accounts and how they work in this guide. If you had placed another entry order below the slope of the higher lows, then you would cancel it as soon as the first order was hit. In this example, if we placed an entry order above the slope of the lower highs, we would’ve been taken along for a nice ride up. For example, three touches of the support line and two for the resistance line.

How To Trade Triangles – A Step By Step Guide

However, the majority of the time, bilateral patterns end up breaking in the direction of the prevailing trend and that’s why most traders recognize these as continuation patterns. When you see the ascending triangle, descending triangle or symmetrical triangle patterns and you want to place a trade, you can do so via derivatives such as CFDs. So, depending on what you think will happen with the asset’s price when one of the triangle patterns appears, you can open a long position or a short position. Once the ascending triangle pattern is established, traders can anticipate a breakout to the upside, given the pattern’s bullish implications. By applying the measured distance at the point of the breakout, traders can identify potential profit levels.

False breakouts are the main problem traders face more often when trading triangles, or any other chart pattern. A false breakout is when the price moves out of the triangle, signaling a breakout, but then reverses course and may even break out the other side of the triangle. Triangle patterns in forex are powerful indicators of mid-trend consolidation. As a forex trader, comprehending these patterns is crucial to making informed trading decisions. This guide explores the definition, importance, and variations of triangle patterns in the forex market.

One of the disadvantages of the formation is the risk of a fakeout when the price moves in the previous direction. Prices on the upper trendline continue to decline, narrowing the triangle formation, until the level of support represented by the lower trendline is broken. In the ascending triangle, the price breaks the horizontal line upwards, while in the rising wedge, there is an impulse breakout of the upper line downside.

Place stop-loss below the low of the last swing wave of ascending triangle pattern after the Breakout of the zone. To identify a false breakout, one of the proven methods is to analyze the candlestick that is breaking the trendline or resistance zone. The candlestick that is breaching through the zone must be bigger in size than a few previous candlesticks.

Types of triangle patterns

This provides an approximate target for where the price may move following the breakout. With the continuation triangle strategy, the idea is to anticipate that the price will eventually break out of the triangle but in the direction of the underlying trend. For example, if the price is trending up, then the price will eventually break out to the upside above the trendline. On the other hand, if the price were trending lower, the price would break below the trendline. Ascending and descending triangles are the opposite types of the triangle pattern. Each chart created for educational purposes has an ideal form of the pattern.

This creates selling pressure as price consolidates moving towards the apex. The resulting shape is a right triangle whose hypotenuse moves downward over time. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.