Ascending triangle shows a horizontal upper trendline located at a resistance level along with a support trendline sloping upwards. The upper trendline shows resistance with identical highs, while the lower trendline shows consistently higher lows. A breakout from this bullish chart pattern occurs when the exchange rate penetrates above its horizontal resistance level.

Triangle patterns are popular because they provide traders with clear visual signals of potential price breakouts during periods of market consolidation. A triangle pattern works by forming between two converging trend lines with at least two touch points on each side to define valid support and resistance levels. The triangle chart pattern’s shape requires appropriate trendline angles, not too steep or shallow.

Once the price has broken below the lower horizontal support, the initial profit target for the trade should be set at a height equal to the size of the triangle. Just like trading an ascending triangle pattern, it is usually the distance between the horizontal line and the leftmost point of the descending trend line. However, after the initial retracement, smaller traders enter the market and the liquidity as well as volatility starts to go down.

1. In other words, you should trade in the direction of the side, which has higher inclination.
2. To trade a triangle pattern using the conservative entry strategy, traders should wait for a pullback and retest of the breakout level before entering a position.
3. After several hours of range-bound price action, the GBPUSD bulls finally pushed the price above the horizontal resistance level with a clear break on the hourly chart.
4. Filippo’s goal with InvestinGoal is to bring clarity to the world of providers and financial product offerings.
5. Remember, technical analysis is just one aspect of trading, and market conditions can change rapidly.
6. I am sure you have heard about chart patterns in Forex trading and their relation to technical analysis.

While their prolific writing career includes seven books and contributions to numerous financial websites and newswires, much of their recent work was published at Benzinga. As you can see in figure 5, the AUDCAD trade reached the profit target within the next several hours. Furthermore, as soon as it reached the profit target, the downtrend literally ended, and the market started ranging. Here, the Stop Loss should be just above the descending trend line of the bar that broke the triangle.

The second smaller curve can resemble a flag pattern if the trend lines are parallel to each other. All content published and distributed by Us and Our affiliates is to be treated as general information only. Testimonials appearing on the website may not be representative of other clients or customers and is not a guarantee of future performance or success. If you want to receive an invitation to our live webinars, trading ideas, trading strategy, and high-quality forex articles, sign up for our Newsletter. Often, before the actual breakout, a false breakout in the opposite direction can be seen. The image above shows the H4 chart of the USD/CHF Forex pair for Jan – Feb, 2016.

This pattern shows indecision in the market, as buyers and sellers are evenly matched. So most of the time it’s better to wait until the pattern is complete before making any trading decisions. As you can see on this chart, a descending triangle mirrors its counterpart and has one sloping and one horizontal trend line.

What is a symmetrical triangle?

Traders expect the price to break out to the upside with a higher probability of success when an uptrend precedes a symmetrical triangle. It’s important to keep in mind that the market is ultimately unpredictable and can defy predictions at any moment. If you’re going to use triangle patterns, make sure you take positions only after you confirm a breakout in the price action of the security in question. Not surprisingly, the descending triangle is the opposite of the ascending triangle. It forms when the price follows a downward trendline and then consolidates, failing to make new lows or break a downward trendline.

What is a bearish ABC pattern?

The upper trendline provides resistance, while the lower provides support. Basically, the reverse of an ascending triangle, the descending triangle has a resistance level characterized by a downward-sloping line, while the support line forms horizontally. When the lower support level of this bearish pattern is breached, the preceding downward trend should continue.

Bullish Pennant

1. As you can see in figure 5, the AUDCAD trade reached the profit target within the next several hours.
2. Traders wait for the price to breach the horizontal support line when placing sell orders below the support level to capitalize on the expected downward movement.
3. The triangle pattern’s breakout leads to a strong directional move, enabling traders to capitalize on the subsequent price action.
4. So in this lesson, we will discuss the basic triangle formations and some ways to properly identify and trade these patterns.
5. 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.

In between, there has been a temporary price rise to a level of resistance. For a falling wedge, the price should break through a resistance level to start an uptrend. Although the price does typically break out in the same direction as the prevailing trend, it doesn’t always happen.

Falling Wedge

The triangle pattern’s success rate arises from its ability to capture periods of consolidation where supply and demand dynamics are clearly delineated. An increase in the buying pressure against horizontal resistance leads to a higher likelihood of a breakout in the direction of the prevailing trend for an ascending triangle. The descending triangle forms in downtrends where selling pressure builds up, making the breakout predictable. The symmetrical triangle’s balanced nature provides a solid basis for forecasting, although its success is slightly lower due to the equal and opposing pressures. To trade a triangle pattern using the conservative entry strategy, traders should wait for a pullback and retest of the breakout level before entering a position.

Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. You will generally want to have prudent risk and money management protocols integrated into your trading plan when trading the triangle pattern. The most important risk to avoid is depleting your account due to a bad trade, and you also want to strictly avoid trading with money you cannot afford to lose. Most triangle patterns develop during market consolidation phases during which trading conditions calm and volatility gets progressively lower. Expanding triangles are the exception because they can show the opposite characteristics of increasing volatility and more active trading conditions. While you can trade various triangle patterns discussed in this article as a standalone system, it works best in combination with other technical strategies.

This series of higher lows indicates sellers are becoming less successful in lowering prices. Eventually, the price breaks above the resistance level, signaling the resumption of an uptrend. You can also use technical indicators like moving averages to confirm the trend direction and momentum indicators like the Relative Strength Index to confirm breakouts.

Measure the height of the triangle and apply it to the breakout point to set your target. Watch for a breakout below the flat lower trendline, suggesting sellers are in control. Enter a short position (sell) when the price breaks below the lower trendline, with a triangle forex pattern stop loss just above the previous high within the triangle. Use the height of the triangle to estimate the potential move and set your target.