Triangle Patterns: 3 Types that are Important and Need to Be Understood Before Trading
Triangle pattern is a pattern that is in technical analysis created by drawing trend line on price movement with smaller range from highest and lowest price.
If you look, you will find triangle pattern has triangular formation. The pattern of such a chart is formed from 2 trend lines ie flat, up or down with the price moving between the 2 trend lines.
Traders focused on technical analysis see the breakout occurring from the triangle formation as a bullish and bearish indication.
In order to better understand your understanding of the triangle pattern. Here we will present 3 types of triangle that traders need to know.
A symmetrical triangle pattern is an advanced pattern that signals the consolidation period in a trend followed by a continuation of a previously established trend.
This one type is formed from the downward resistance line convergence and 1 support line rises. 2 trend lines in a triangle formation this one is required to have the same level of slope and will later meet at a point
The price movement will be between the two trend lines that occur and get to the intersection of both lines. In general there will be a break in the direction of previous trends that have ever formed.
When the trend previously formed is a downward trend, then the focus is on the break of the support line. Vice versa, when the previous trend is a rising trend there will be potential penetration of the resistance line.
However, this pattern will not always show continuation of previous trends. When a break occurs that has a direction opposite to the previous trend, then this indicates a potential for the formation of a new trend.
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 one pattern is formed by 2 trend lines, 1 flat trend line which becomes resistance point and 1 trend line up that acts as price support.
Price movement is within both trend lines until it will eventually cross the upper resistance line. This pattern will usually start with a rising trend and make this formation a continuation pattern. However, such a pattern can still be found when a downward trend occurs.
An example of the movement of this pattern is usually like this, first the price starts to move to the new highs then followed by a correction. Starting here the next price will move up again and test the previous highs that act as resistance.
When it fails to break the previous resistance, then the price will move down, but to the lowest level higher than the previous low. Things like this will continue until the price moves above the horizontal trend line or the pattern will fail to be confirmed.
The most important thing to note from this pattern is the upside support line, which will indicate the strength of the descending start strengthening, but further weakening as the price continues testing the resistance level. After a break of the flat trend line, the price will resume its previous uptrend. Such a pattern will be confirmed when the price has crossed the flat resistance line. However, the price can still go towards the trend line of support shortly after penetration which will eventually thwart the pattern.
The last pattern is the descending triangle which is the reverse of the ascending triangle which will give a bearish forex signal for traders using technical analysis. This one pattern will indicate that there will be further declines when the pattern is confirmed.
This formation is formed from the trend line of support of flat with trendline resistance line decreasing. This formation is similar to the ascending triangle which is generally considered to be an advanced pattern preceded by a downward trend. Nevertheless, this pattern can still be found on an upward trend.
The movement of this pattern usually begins with the price down to the lowest level, then there is a rebound that will make the lowest price that formed as support. The next move is testing the support at the previous lows, where the price has not made it past so the price may 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 penetrate downwards to further continue the downward trend.When this pattern occurs, it indicates an enlarged strength, but continues to weaken as the price continues to try at the support level.
Understanding the three triangle patterns above is very important to do the traders who just entered the world of trading. Understanding you see patterns well will increase your chances of gaining more profit.
If from the above discussion there are still explanations that make you confused, please just ask us through the comments field below. Any incoming questions, we will be happy to answer them for you.
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