What are triangle patterns?
In forex, we have various continuation patterns, and the triangle pattern is one of those. As soon as the pattern ends, we expect that the price will continue to go in that same trend direction before the pattern’s appearance. We can encounter triangle chart patterns when the price moves towards a tighter range in the long run. They also let us see what happens in the competition between the buyers and sellers. If there are at least five support and resistance touches, it can qualify as a triangle pattern. For instance, three resistance line touches, and two support line touches. Let us get to know the three types.
One of three: the symmetrical triangle
In symmetrical triangles, the slopes of its price’s highs and lows converge where the result is a triangle-lookalike. This formation tells us that the market creates lower highs and higher lows. Both the buyers and sellers are not strong enough to push the price and make a clear trend. It is a consolidation.
In this game, with the buyers and sellers as the participants, it is a draw, so we have lower highs and higher lows. IF you see the two slopes getting nearer and nearer to each other, then a breakout is about to happen. However, we do not know what the direction is going to be.
Now that we know that one side of the market will give up soon, we can make entry orders above the lower high’s slope and below the higher low’s slope. We can follow where the market moves since we already know that there will be a breakout soon.
Two of three: the ascending triangle
In ascending triangles, there is a slope of higher lows and a resistance level. Here, the buyers cannot go past a certain level, but they slowly try to increase the price. If you see the chart having higher highs, it means that the buyers are getting stronger. They put too much pressure on the resistance level to the point that it triggers a breakout. Usually, buyers succeed, and the price gets through the resistance. However, this does not always happen. There are times when the resistance is too strong, but the buying power is not. Yes, the price goes up most of the time, but you should get ready for both directions since there is no assurance. Here is what we can do: place an entry order above the resistance line and below the higher low’s slope.
Three of three: the descending triangle
As the name suggests, descending triangles give contrast to the ascending ones. A string of lower highs makes up the upper line. The lower line is the support level that the price cannot break. For instance, a price can slowly create lower highs where sellers are slowly overpowering the buyers.
Usually, the price gets past the support line and continues to decline. However, the support line can be too intense that it makes the price have a sharp increase. But the only important thing, right now is the fact that we already have an idea that the price is headed in a direction even if we are not sure where. Here is what we can do: place entry orders over the upper line/ lower highs and below the support line.
To close the topic
Triangle patterns give us a good glimpse of what happens between the buyers and sellers. It has three types that let us further understand one situation to another. It also suggests ideas that make us develop better trading decisions.