In continuing the series of chart patterns, today, I will introduce you to the Triangle pattern. This is a popular price pattern that Forex traders use in trading. Let’s take a look at what a Triangle pattern is and how to trade effectively with it.
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What is the Triangle pattern? Characteristics and common types
Triangle is a common market price continuation pattern. This pattern has a horizontal triangle shape with the bottom (starting section) on the left side shrinking gradually, creating the top of the triangle on the right side. Prices will fluctuate in the range of a resistance level and a support level that converge to the right. The pattern comes to an end when the price breaks out of either the resistance or support level and creates a new trend.
Characteristics of Triangle pattern
A pattern that has the following characteristics is more effective.
+ Before breaking out, prices need to touch both resistance and support levels at least twice each for the pattern to take effect.
+ This pattern gives a buy signal (breaking out of the resistance) which is more effective than a sell signal (breaking out of the support).
Common types of Triangle patterns
Depending on the triangle shape, we have 3 types as follows:
Symmetrical Triangle
This is a Triangle pattern with a descending resistance level and an ascending support level converging on the right. It forms a horizontal symmetrical triangle. This is the most common type out of the 3.
A practical example of the Symmetrical Triangle pattern.
Ascending Triangle
This type of pattern consists of a horizontal resistance level and an ascending support level. Hence, the top of the triangle will face up. For the pattern to take effect, the price must touch each level twice at least.
A practical example of the Ascending Triangle pattern.
Descending Triangle
Contrary to the second type, the Descending Triangle has a face-down top when formed by a descending resistance level and a horizontal support level. This pattern is only effective when the price touches each level twice at least before breaking out.
A practical example of the Descending Triangle pattern.
How to trade with the Triangle pattern
The Triangle pattern gives an entry signal following the direction of the price breakout. Specifically, when the price breaks out of the resistance and goes up, we open an UP order. And when it breaks out of the support and goes down, we open a DOWN order. I will detail how to trade with the Triangle so that you get the most out of your profits.
For Forex
In Forex trading, you need to clearly define the entry point, take-profit, and stop-loss to be able to make the most of this pattern.
How to enter a trade is as follows.
When the price breaks out of the resistance, open an UP order. You can open an order as follows:
+ Entry Point: When the candlestick finishes breaking out of the resistance.
+ Stop-Loss: At the level where the price last hit the support before breaking out.
+ Take-Profit: From the entry point, the length is equal to the widest price amplitude generated within the Triangle.
When the price breaks out of the support, open a DOWN order. You can open an order as follows:
+ Entry Point: When the candlestick finishes breaking out of the support.
+ Stop-Loss: At the level where the price last hit the resistance before breaking out.
+ Take-Profit: From the entry point, the length is equal to the widest price amplitude generated within the Triangle.
For Binary Options
With this type of trading, everything needs to be absolutely accurate and secure. The retest point of the Triangle pattern is a safe entry signal. To increase accuracy, you should open an order with a long expiration time of 45-60 minutes. How to open an order is as follows:
Requirements: A long expiration time (If you use the 5-minute Japanese candlestick chart to analyze the market, the expiration time for a binary options order should be between 30 and 45 minutes.)
How to open an order:
+ Open an UP order when the price retests the broken resistance of the Triangle.
+ Open a DOWN order when the price retests the previously broken support of the Triangle.
In conclusion
There are many ways to use the Triangle pattern so that you can make a profit. You can combine this with indicators that will increase the efficiency of your trading.
Get familiar with this pattern today to test it out. And if you do not have a Demo account for testing, register for an Olymp Trade account by clicking on the box below. This is a platform offering both Forex and Binary Options (Fixed Time Trade) trading which are very convenient for you to test the strategy. Finally, I wish you a successful transaction.
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The post Triangle Pattern: Characteristics And How To Trade Effectively appeared first on How To Trade Blog.
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