Triangle patterns are popular technical chart patterns that traders use to predict potential price movements. They can be applied to all types of assets, from stocks and commodities to currencies and bonds.
Triangle patterns appear in three different variations (ascending, descending, and symmetrical) and can indicate the resumption of a current trend (uptrend/downtrend). Triangle patterns consist of an upper and a lower trendline, and a trading signal is triggered once the price breaks out of the pattern.
Triangle patterns can be bullish or bearish, depending on the direction in which the price breakout is occurring.
There are 3 types of triangle patterns, which we will present below.
The ascending triangle is a bullish continuation pattern and consists of a rising lower trendline and a flat upper trendline (acting as resistance). A bullish signal is created once the price breaks out of the triangle and continues to move in the direction of the trend.
Firstly, traders should identify the current trend of the instrument and ensure it is in an uptrend.
The ascending triangle´s main characteristics are a rising lower trendline, which suggests the price is being pushed higher, and a flat upper trendline, which indicates strong resistance.
The price will consolidate for a while within the triangle, and traders will wait for a breakout to the upside to confirm that the uptrend is resuming.
The descending triangle is a bearish continuation pattern and consists of a declining upper trendline and a flat lower trendline (acting as support). A bearish signal is created once the price breaks below the flat lower trendline and continues to move in the direction of the trend.
When looking for a descending triangle, ensure that the instrument is in a downtrend.
The falling upper trendline, which indicates that the instrument is making lower highs, is a sign of a descending triangle. Meanwhile, the lower trendline is flat and acts as key level of support.
A breakout below this flat level could signal the continuation of the downtrend.
The symmetrical triangle is a neutral chart pattern. The price of the instrument is consolidating, and the converging trendlines are moving towards each other and getting narrower. The narrower they become, the higher the chance of a breakout.
We call the symmetrical triangle a neutral chart pattern because traders are not necessarily anticipating a breakout in a specific direction. The price is consolidating within a range, and traders will trade in whatever direction the breakout occurs.
That being said, when a symmetrical triangle appears during a strong uptrend, traders might be looking specifically for a breakout to the upside and ignore bearish signals as they do not wish to go against the trend. At the same time, they might ignore a breakout to the upside if the instrument is in a strong downtrend.
As the name indicates, the pattern consists of two converging trendlines. The price action suggests that there is a battle going on between bulls and bears.
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FAQ
Triangle patterns are chart patterns formed by converging trendlines on a price chart. They indicate a period of consolidation prior to a potential breakout that could lead to the resumption of the prevailing trend.
Triangle patterns are identified by drawing trendlines connecting the series of higher lows and lower highs. Once the lines converge, they form a triangular shape on the chart.
The three main types of triangle patterns are symmetrical, ascending, and descending.
A symmetrical triangle pattern is a pattern formed by two converging trendlines with similar slopes. A potential breakout could occur in either direction.
An ascending triangle pattern is formed by a flat upper trendline and a rising lower trendline. A breakout is expected to occur above the upper trendline, making it a potentially bullish signal.
A descending triangle pattern is formed by a flat lower trendline and a declining upper trendline. A breakout is expected to occur below the lower trendline, making it a potentially bearish signal.
No. As with every chart pattern, there can be false signals. Traders can use additional tools (such as technical indicators) to potentially make them more reliable.
Traders often wait for a breakout above the upper trendline (bullish) or below the lower trendline (bearish) before entering trades. Stop-loss and take-profit levels are set to manage risk.
Traders use measured move targets to determine how far the price could move after the breakout based on the height of the triangle pattern.
Yes, triangle patterns can signal a continuation of the existing trend.
Traders often use technical indicators and/or additional chart patterns (such as classic support and resistance) to improve the reliability of the signals.
Yes, false breakouts can occur when the price briefly breaks out of the pattern but then reverses again. This is why traders use additional tools along with triangle patterns.
Yes, triangle patterns can be observed on various timeframes, from minutes to weekly charts.