Triangle Pattern

Triangle Pattern

Triangle Pattern

A triangle pattern is a technical analysis pattern created by drawing trendlines along a price range. This price range is narrowing over time because it has lower tops and higher bottoms. The upper and lower trendlines meet at the apex on the right side, forming a corner. Since this is one of the most common tools, we decided to write an article on the subject, so that you can see for yourself how it can help you. Keep reading our article and you will improve your trading skills!

Triangle Pattern | Ascending and Descending Triangle

Let’s start our analysis with the most important triangle pattern types: ascending and descending triangles. The ascending triangle is a bullish pattern. It is formed by two Trend Lines: a flat trend line is a point of resistance and an ascending trend line is a price support. The price of a security moves between these trend lines, and at some point it breaks out to the upside. The fact that it’s usually preceded by an upward trend tells us that this is actually a continuation pattern.

A descending triangle, on the other hand, gives a bearish signal. It’s made of a flat support line and a downward-sloping resistance line. The price firstly falls to a low that then finds a level of support, which sends the price to a high. After that, the price goes up, but to a lower level than the previous move higher. This process is repeated until the price is unable to hold the support level.

Triangle Pattern | Symmetrical Triangle

The symmetrical triangle pattern is made out of a diagonally falling upper trend line and a diagonally rising lower trend line. As the price moves towards the apex, it breaches the upper trend line for a breakout and uptrend on rising prices. It can also breach the lower trend line – in that case, it forms a breakdown and downtrend with prices that fall. This type of triangle is usually a continuation break pattern – it tends to break in the direction of the initial move. But how do we interpret these patterns? Keep reading and learn all about it!

Triangle Pattern | Consolidations and Corrections

Let’s put it simple – whenever the market is consolidating, it’s most likely that a triangle will be formed. Triangles can be contracting or expanding: their trend lines either point towards a common ground on the right side of the chart, or they will never meet.

If they act as reversal patterns, they are basically the end of a complex correction (they connect two simple corrections, and the last one is usually a triangle). On the other hand, the whole complex correction can be retraced. In that case we should adjust the expiration date according to each and every time frame the triangle is forming.

Triangle Pattern | Conclusion

As already stated, triangle pattern can be a very useful tool in your technical analysis. If you learn how to interpret it, it can really tell you a lot about the price movements. It won’t take you too much time, but the benefits of learning about them will be really significant. Hopefully, this article will put you on the right path!

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FURTHER READING:

1. Charting Made Easy (J. Murphy, 2000)
2. The Age Of Turbulence: Adventures In A New World (A. Greenspan, 2007)
3. Step By Step Trading (A. Elder, 2015)
4. Speculation spreads and the market pricing of proposed acquisitions  (Jan Jindraa , Ralph A. Walkling-2004)
5. Stocks For The Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies (J. J. Siegel, 1994)

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Author: Ben Prescott
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