What is Triangle chart pattern?
Triangle chart patterns are one of the more commonly found chart patterns. They help indicate the continuation of a bullish and bearish market. They can also assist a trader in spotting a market reversal.
These triangle patterns are relatively easy to trade and can be formed across different chart time frames. The triangle patterns fall under the continuation patterns. Meaning that depending on where they occur within the trend, the triangle that is formed signals a continuation of the trend or can also be traded as a reversal pattern
How does it work?
It is a chart pattern, characterized by horizontal top and rising bottom. This pattern is formed because of tug of war between the two great forces which move the price up and down that is demand and supply. This is created when a bullish market pushes up against a resistance level. They are the pressure areas in a stock chart where the area of resistance tries to block a rising price. But the underlying bullishness of the market pushes the price slowly with swing ups and swing downs, which forms a pattern, which looks like a triangle. The top of the triangle is horizontal resistance trend line and the bottom is up sloping support trend line.
It may be both reversal and continuation chart pattern. It is so named because the ascending support trend line predicts the rise in prices, hence the name ascending triangle.
How to Trade with Ascending Triangle pattern?
· In order to qualify as a continuation pattern, an established trend should exist.
· At least 2 reaction highs are required to form the top horizontal line.
· At least two reaction lows are required to form the lower ascending trend line.
· If a more recent reaction low is equal to or less than the previous reaction low, then the ascending triangle is not valid.
· As the pattern develops, volume usually contracts. When the upside breakout occurs, there should be an expansion of volume to confirm the breakout.
· Once the breakout has occurred, the price projection is found by measuring the widest distance of the pattern and applying it to the resistance breakout.