The Ascending Triangle Pattern: What It Is, How To Trade It

As the price makes many trips between the resistance and the support, the volume of trades becomes increasingly scarce. Only if the price makes two different minor highs prior to any breakout will the pattern be considered genuine. The triangle was preceded by the downtrend as the sellers took a step back to consolidate recent gains. The upper line is forcing the price action to go towards the supporting line, therefore squeezing the space between two lines.

They gradually suppress the price increase and often force the market back into the downtrend. The descending triangle is identical to the ascending triangle except the situation is reversed. Of course, the resistance could also be very strong and there is not enough buying power to push it through. This happens more frequently during consolidating downtrends, but it can also happen in extended uptrends.

Psychology of the Ascending Triangle

In a well-defined ascending triangle pattern, the price bounces between the horizontal resistance line and the lower trendline. Triangles are similar to wedges and pennants and can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure. There are three potential triangle variations that can develop as price action carves out a holding pattern, namely ascending, descending, and symmetrical triangles.

So if the market breaks through the resistance level, then a new rally may form. In descending triangle chart patterns, there is a string of lower highs that forms the upper line. The lower line is a support level in which the price cannot seem to break. The ascending triangle pattern is similar to the symmetrical triangle except that the upper trendline is flat and the lower trendline is rising. Price approaches the flat upper trendline and with more instances of this, the more likely it is to eventually break through to the upside. The descending triangle is a bearish pattern that is characterized by a descending upper trendline and a flat lower trendline that acts as support.

Ascending and descending staircase

Technicians see a breakout, or a failure, of a triangular pattern, especially on heavy volume, as being potent bullish/bearish signals of a resumption, or reversal, of the prior trend. It forms when price moves into a tighter range depicting combat between the bulls and the bears. The ascending triangle is a bullish continuation pattern and is characterized by a rising lower trendline and a flat upper trendline that acts as support. This pattern indicates that buyers are more aggressive than sellers as price continues to make higher lows. The pattern completes itself when price breaks out of the triangle in the direction of the overall trend.

Then, the long green candle confirms that the reversal is underway. If the second candle is a doji, then the chances of a reversal increase. The trend is also seen as being stronger if the final candle gaps above the close of the second one.

How to Trade Triangle Chart Patterns

Now that we know the basics, let’s look at some of the most common chart patterns in technical analysis. The pattern is negated if the price breaks the downward sloping trendline. After a downtrend, a market hits a strong support level, but with ever-lower resistance. As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!).

Traders anticipate the market to continue in the direction of the larger trend and develop trading setups accordingly. The difference between the symmetrical and the other triangle patterns is that the symmetrical triangle is a neutral pattern and does not lean in any direction. While the triangle itself is neutral, it still favors the direction of the existing trend and traders look for breakouts in the direction of the trend. The descending triangle (also known as the ‘falling triangle’) is one of the top continuation patterns that appears mid-trend. Candlestick charts provide more information than line, OHLC or area charts.

Symmetrical triangle

The engulfing candlestick pattern provides insight into trend reversal and potential participation in that trend with a defined entry and stop level. When the market enters the pattern from bottom to top (bullish trend) and breaks through the horizontal border upwards, the signal is considered the strongest. If the price enters the pattern from top to bottom (bearish trend) but further breaks the upper border, the bullish signal is deemed to be weak.

• And sell positions below the low-level slope line, by pending buy stop and sell stop orders.
• Symmetrical triangles, flags and wedges are all formed by two trend lines that indicate indecision in the market.
• The price motion needs to fill the area in between the two sloping lines, and there need not be a great deal of white space within the body itself.
• It usually occurs after a downtrend, and is formed when a horizontal set of lows (the support level) is met by a descending set of highs (resistance).

I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Traders may wish to wait for confirmation of the trend because sometimes a head-fake could cause distractions. It is a situation when the price moves in one direction but suddenly reverses. Triangles provide an effective measuring technique for trading the breakout, and this technique can be adapted and applied to the other variations as well. There are two best working conditions you should add to your trading strategy to get better results.

Learn how the volume behaves in the patterns, and keep an eye out for any strange developments. Although the volume action presented here is a model formation, it is not unusual for there to be variances. Especially upward breakthroughs should be accompanied by a significant increase in volume. On the other hand, a breakout to the downside with minimal volume activity performs better. Trading patterns that most closely resemble triangles are called horizontal triangles. The triangle is in its most expanded stage just at the beginning of its development.

Then we will show you how backtesting the improved strategy on a different time period yielded a whopping +10.48% return in only 3 months. While this means that the strategy has only been evaluated on historical market data (no real money), the process and ideas discussed will provide tremendous value. Next, we back to the second step to identify more specific patterns. The following are the requirements for pattern identification criteria. Conversely, if the channel narrows, it might be included in the Fibonacci Gartley or Bat pattern. Whereas if the channel is almost parallel, it may be classified as Crab, Butterfly, or Cypher pattern.

As a result, a large number of trades are closed (2), thereby decreasing liquidity. Afterwards, the cycle repeats itself – we can see narrowing of the price range and formation of the “Triangle” pattern in the Section #2. Orders and positions are again added to until the pattern is broken out next time– see the point (3). As we’ll cover below, traders triangle forex pattern usually look to confirm a pattern before they start trading. One way to confirm an ascending triangle is to look at volume indicators – activity should decline within the pattern, but then quickly pick up as the breakout takes hold. When markets are forming lower lows and lower highs this can be considered a downtrend and forms a descending staircase.

Reasons for the “Triangle” Pattern Formation

Thus, an ascending triangle is considered a bullish pattern that precedes a rise in price movement and trading volume. When trading the descending triangle, traders need to identify the downtrend and this can be seen in the EUR/USD chart below. Thereafter, the descending triangle appears as the forex candlesticks start to consolidate. The measuring technique can be applied once the triangle forms, as traders anticipate the breakout.

If this were a battle between the buyers and sellers, then this would be a draw. The illustration below shows the distance from A to B can be transferred higher up, from C to D, in order to project a possible take profit level. There are three types of Triangle Pattern; ascending, descending, symmetrical. It will draw real-time zones that show you where the price is likely to test in the future. It is recommended to properly backtest this strategy before trading on a live account.