Forex Trading Basic

How to Trade with Triangle Chart Patterns

How to Trade with Triangle Chart Patterns

Trade with Triangle Chart Patterns

Symmetrical Triangle

symmetrical triangle is a chart formation where the slope of the price’s highs and the slope of the price’s lows converge together to a point where it looks like a triangle.

What’s happening during this formation is that the market is making lower highs and higher lows. This means that neither the buyers nor the sellers are pushing the price far enough to make a clear trend.

If this were a battle between the buyers and sellers, then this would be a draw.

This is also a type of consolidation.

Trade Triangle Chart Patterns

In the chart above, we can see that neither the buyers nor the sellers could push the price in their direction. When this happens we get lower highs and higher lows.

As these two slopes get closer to each other, it means that a breakout is getting near. We don’t know what direction the breakout will be, but we do know that the market will most likely break out. Eventually, one side of the market will give in.

So how can we take advantage of this?

Simple.

We can place entry orders above the slope of the lower highs and below the slope of the higher lows. Since we already know that the price is going to break out, we can just hitch a ride in whatever direction the market moves.

Trade Triangle Chart Patterns

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.

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.

Ascending Triangle

This type of triangle chart pattern occurs when there is a resistance level and a slope of higher lows.

What happens during this time is that there is a certain level that the buyers cannot seem to exceed. However, they are gradually starting to push the price up as evident by the higher lows.

Trade Triangle Chart Patterns

In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows. They keep putting pressure on that resistance level and as a result, a breakout is bound to happen.

Now the question is, “Which direction will it go? Will the buyers be able to break that level or will the resistance be too strong?”

Many charting books will tell you that in most cases, the buyers will win this battle and the price will break out past the resistance.

However, it has been our experience that this is not always the case. Sometimes the resistance level is too strong, and there is simply not enough buying power to push it through.

Most of the time, the price will in fact go up. The point we are trying to make is that you should not be obsessed with which direction the price goes, but you should be ready for movement in EITHER direction.

In this case, we would set an entry order above the resistance line and below the slope of the higher lows.

Trade Triangle Chart Patterns

In this scenario, the buyers lost the battle and the price proceeded to dive! You can see that the drop was approximately the same distance as the height of the triangle formation.

If we set our short order below the bottom of the triangle, we could’ve caught some pips off that dive.

Descending Triangle

As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!). In descending triangle chart patterns, there is a string of lower highs which forms the upper line. The lower line is a support level in which the price cannot seem to break.

Trade Triangle Chart Patterns

In the chart above, you can see that the price is gradually making lower highs which tell us that the sellers are starting to gain some ground against the buyers.

Now most of the time, and we do say MOST, the price will eventually break the support line and continue to fall.

However, in some cases the support line will be too strong, and the price will bounce off of it and make a strong move up.

The good news is that we don’t care where the price goes. We just know that it’s about to go somewhere. In this case, we would place entry orders above the upper line (the lower highs) and below the support line.

Trade Triangle Chart Patterns

In this case, the price ended up breaking above the top of the triangle pattern. After the upside breakout, it proceeded to surge higher, by around the same vertical distance as the height of the triangle.

Placing an entry order above the top of the triangle and going for a target as high as the height of the formation would’ve yielded nice profits.

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Please note that: Successful Technical Analysis largely depends on the functionalities of the MT4 Platform provided by your broker. If you are new in forex trading, you might consider reading the article on what is the best trading platform, Introduction to MT4 Platform and MT4 Platform functions. We have used a fully functional MT4 platform provided by HYCM Broker. Read why their MT4 platform has better trading conditions from the HYCM Broker review.

READ MORE

Chapter 5

Technical Analysis in Forex Trading

Lesson 1Types of Technical Analysis Indicators
Lesson 2Forex Trading Trendline Analysis
Lesson 3Forex trading Chart Patterns
Lesson 3.2Double Tops and Double Bottoms
Lesson 3.3Head and Shoulders Pattern
Lesson 3.4Rectangle Chart Patterns
Lesson 3.5Triangle Chart Patterns
Lesson 4Japanese candlestick Trading Strategy
Lesson 4.2Japanese candlestick Trading Strategy Part 2
Lesson 5Support and Resistance Levels
Lesson 6Types of Technical Analysis Indicators
Lesson 6.2moving averages Technical Analysis
Lesson 6.3MACD Indicator Technical Analysis
Lesson 6.4RSI Indicator Technical Analysis
Lesson 6.5Stochastics Indicator Technical Analysis
Lesson 6.6Technical Analysis with Bollinger bands Indicator
Lesson 7Fibonacci Retracement Forex Strategy
Lesson 8Forex Trading Pivot Strategies

Go back to Main Page: Forex Trading for Beginners

About the author

Syed Nazim

Syed Nazim is the Marketing Manager of RedMaroon, a Digital Marketing Agency for Financial Institutions. He is also involved with Forexing24.com as a writer and financial Analyst. He is a brilliant marketing geek with vast experience in every sector of Digital Marketing. He likes sharing strategies, tactics and proven methods to help you build a business and live the life of your dreams.

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