The Triangle pattern is a one of the technical analysis indicator that gives the idea of the market sentiment and spot rising trends. It anticipates the information about the price movements and predicts the possible entry and exit points. On the whole, a vigilant analysis of the pattern could help to know the potential trading opportunities. Now, what is triangle pattern? Let’s understand it below.

TRIANGLE CHART PATTERN

It is evident that triangle pattern is a technical analysis tool used in making trading decisions. It is named as such due to triangle resemblance which is a continuation pattern on a chart which looks like a triangle. This is as same as wedges and pennants. In contrast to other chart patterns, triangle patterns can anticipate the continuation of the previous trend or a reversal. Before acting on this chart it is important for traders to look for a breakout of the triangle, though triangles anticipate a continuous past trend.

CLASSIFICATION OF TRIANGLE CHART PATTERN

A Triangle pattern becomes evident when a stock’s price range decline after an uptrend or downtrend, ranging a phase of consolidation, accumulation, or distribution before the continuation in trend. Triangle patterns are classified into: Ascending, Descending, and symmetrical.

ASCENDING TRIANGLES

Ascending triangle is a bullish formation with a breakout pattern that forms when the price breaks the upper horizontal trend line. It is a breakout pattern that is form when the price breaks the top horizontal trend line with the rising volumes. The upper trend line depicts nearly identical highs and must be horizontal to form a resistance level. The lower trend line depicts the rising diagonal who are purchasers patiently step up their bids. Naturally, many buyers lose their emotional stability and rush into the security above the resistance level. The upper trend line will now act as a support.

The Ascending triangle is an effortless approach to take the advantage of breakouts in a trend. Consider the following example:

  • Mr. Anil evaluates a stock chart where the price movements make an ascending triangle pattern.
  • During observation he comes to a conclusion that the indication is a bullish pressure as the price is repeatedly testing the resistance level while forming higher lows.
  • Now, when the price reaches the top of the triangle, He anticipates a breakout above the exact plot trend lines. he come to a conclusion that the direction of the breakout fluctuations based
  • on high volume
  • sturdy momentum

DESCENDING TRIANGLE

As the name suggests, it is inverted form of ascending triangle and are bearish patterns that predicts a downward trend breakout. The upper trend line which is horizontal should go down diagonally toward the apex. As the price declines the breakdown occurs when the lower horizontal trend line support becomes the resistance.

Firstly, the trader thinks that the losses incurred are caused by themselves. Yes, despite of following the correct strategies sometimes the things goes off the hands. In the first place it is more evident that the losses incurred are due to violating the rules.This type of price movement forms a triangle shape with uniform trend line that is lower than the first. Consider an example:

  • Mr. Anil is evaluating price movements in a stock chart that shows descending triangle pattern.
  • He observes the sign of weakness in the support level.
  • He comes to a conclusion that the breakdown below the support line as:
  • Continuous downtrend
  • The activation of selling pressure.

SYMMETRICAL TRIANGLE

Symmetrical Triangle is a combination of diagonal falling upper trendline and a diagonally rising lower trendline. As the price rises, it certainly breaks the upper trendline for a breakout and upturns on rising prices or breaks the lower trendline give rise to breakdown and downtrend with diminishing prices. Symmetrical triangle is a continuous break pattern, which says that the triangle is formed when the patterns break in the direction of initial move.

Let’s take an example:

Mr.Anil is a skilled trader who is analyzing the stock chart. He observes that

  • The price movements are converging trendlines with symmetrical pattern.
  • As the price approaches the peak of the triangle, he observed the monitors volumes and momentum and concluded that:
  • As the price breaks above the upper trendline with high volume it depicts the bullish momentum with uptrend potential
  • As the price breaks below the lower treadline with high volume it depicts the bearish momentum with downtrend potential.

HOW TO TRADE TRIANGLE PATTERNS

A pattern is formed when the triangle exist with well-established prior trend. A symmetrical triangle should have at least two highs and two lows. In two highs, the second high is lower than the first. In the two lows the second low is higher than the first.

  • The intersection of first high to the second and first low to the second, when it is drawn continuously should form a triangle for all the three types of triangle patterns.
  • To make the triangle identification supportive more highs and more lows points are added to the lines.
  • Over the time, the volume should decline as the stock proceeds further into triangle pattern.
  • Normally, the triangle pattern withstand ranging from one month to three month or more on daily chart before the existence of the breakout while the stock price moves outside the lines of the triangle.
  • The occurrence of best price measures the triangle’s length when the breakout forms about halfway to three-quarters from the top of the triangle.
  • A break before or after this point may be unimportant due to stock inevitability.
  • The direction and strength of these points are important.
  • It is significant for the trader to confirm the initial break, though the direction of initial break indicates the previous trend or reverse in symmetrical triangle.
  • o The strong breakout spikes the trading volume, daily for uptrends, and will move at least numerous percent of the price that lasts for many days. Now, the apex and breakout price levels acts as resistance levels after the breakout. To guess the price target on the breakout, mark the base of the triangle. The distance between the broad high and lows points on the triangle, and sum up to the price of the breakpoint. Link a trendline parallel to the lower triangle line that exceeds from the highest top in the triangle.

CONCLUSION

The price movement in financial markets depicts the interpretation that allows the traders to analyze the emerging trend and decide their trade entry and exit positions. Ascending triangles are bullish whereas descending triangles are generally bearish. Symmetrical triangles are typically the continuous prior trend that can be too reversible. The Triangle patterns are straightforward to interpret the highly favorable trading patterns.