Thursday, November 22, 2018

Triangles Pattern: 3 Types that are Important and Need to Be Understood Before Trading

The triangle pattern is a pattern in technical analysis created by drawing trend lines on price movements with a smaller range of highs and lows.
If noted, you will find the triangle pattern has a triangle-shaped formation. Such a chart pattern is formed from 2 trend lines which are flat, up or down with prices moving between 2 trend lines.
Traders who focus on technical analysis see a break of the triangle formation as a bullish and bearish indication.

So that your understanding is better related to the triangle pattern. Next, we will present 3 types of triangle that traders need to know.

1. Symmetrical Triangle

Symmetrical triangles are an advanced pattern that signals the consolidation period in a trend followed by a continuation of a previously formed trend.

This type is formed from a convergence of decreasing resistance lines and 1 support line rising. 2 trend lines in this triangle formation are required to have the same slope level and will meet at a point later

Price movements will be between 2 trend lines that occur and reach the meeting point on both lines. In general, there will be a break in the direction of the previous trend that has been formed.

When the previously formed trend is a downward trend, the focus is on the break of the support line. Likewise, vice versa, when the previous trend is a rising trend there will be a potential for a break of the resistance line.

Nevertheless, this pattern will not always show continuation of the trend that has previously occurred. When there is a breakout that has a direction opposite the previous trend, this indicates a potential for the formation of a new trend.

2. Scaling Triangle

The next type is the ascending triangle which is a bullish pattern and gives an indication that the price will move higher if the formation is confirmed. This pattern is formed by 2 trend lines, 1 flat trend line which becomes a resistance point and 1 rising trend line which acts as a price support.

Price movements are inside both trend lines until they will finally cross the upper resistance line. This pattern will usually start with a rising trend and make this formation a continuation pattern. However, this pattern can still be found when there is a downward trend.

Examples of movements of this pattern are usually like this, first the price starts moving to the new highest price followed by a correction. Starting from here the next price will move up again and test the previous highest level which acts as resistance.

When it fails to break the previous resistance, the price will move down, but to the lowest level higher than the previous lowest level. This will continue until the price moves above the horizontal trend line or this pattern will fail to be confirmed.

The most important thing to note from this pattern is the rising support line, where it will indicate the downward strength is starting to strengthen, but it is getting weaker as prices continue to test the resistance level. After a break of the flat trend line, the price will continue the previous uptrend. This pattern will be confirmed when the price has crossed the flat resistance line. However, the price can still be heading towards the trend support line shortly after the breakout which will eventually frustrate the pattern.

3. Decending Triangle

The last pattern is a descending triangle which is the opposite of the ascending triangle which will provide bearish signals for traders who use technical analysis. This pattern will indicate that there will be a further decline when the pattern is confirmed.

This formation is formed from a trend line of flat support with a decreasing trend resistance line. This formation is the same as the ascending triangle which is generally considered as a continuation pattern which is preceded by a previous downward trend. Nevertheless, this pattern can still be found in the upward trend.

This pattern movement usually starts with the price going down to the lowest level, then a rebound occurs which will make the lowest price formed as support. The next move is to test support at its previous low, where prices have not made it past so prices can rise again, but still below the previous rebound.

Things like this will continue to repeat until the price is no longer able to hold the support level and break down to continue the downward trend. When this pattern occurs, it indicates an upside strength, but continues to weaken as prices continue to try at the support level.

Understanding the 3 triangle patterns above is very important for traders who have just entered the world of trading. Understanding you see patterns well will increase your chances of getting bigger profits.

If from the discussion above there is still an explanation that makes you confused, please just ask us through the comments column below. Every question that comes in, we will be happy to answer it for you.

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