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 or 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?
Symmetrical Triangle is a chart pattern, characterized by converging top and bottoms. This is created when there is indecision in the direction of the market. The symmetrical triangle pattern is formed by converging of two trend lines where one is considered a resistance level and the other is considered a support level. If a symmetrical triangle forms after an uptrend, this is considered bullish. If a symmetrical triangle forms after a downtrend, this is considered bearish.
How to Trade with Symmetrical 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 horizontal trend line.
- Wait and watch for a candlestick to breakout of the triangle pattern.
- Once this candlestick closes, depending on which side the candlestick closes, you either place a buy stop/sell stop order 2-5 pips from the closing price of that candlestick
- Buy at the right time near the breakout point which can be either the support or resistance trend line depending on the trend direction.
- The breakout as most times will happen about 3/4 of the way towards the apex