There are plenty of technical analysis tools. You can find the continuation patterns among them. And within this group of patterns you will come across triangles.
A triangle pattern is usually recognised along with the trend. It is not so easy to identify until you learn how to draw it.
And here is this guide. To teach you how to draw triangles on the chart, what types of triangles you will see and how to trade with them at Olymp Trade.
How to draw a triangle
In order to draw a triangle, you will need to indicate at least two highs and at least two lows throughout the trend. Then you draw a line that connects your highs, and the second line that connects the lows. Now you just extend both lines up to the moment they come together and form a triangle.
3 different triangle patterns you need to know
Like I said before, there have to be at least two highs and two lows identified if you want to draw a triangle. Now I want to present to you 3 triangle patterns which are called the symmetrical triangle, the ascending triangle and the descending triangle. Let’s start from the symmetrical one.
The symmetrical triangle pattern
There are times of indecision on the markets. The bears and the bulls fight to gain control over the price. Meanwhile, the market is ranging. And that is exactly where the symmetrical triangle pattern could be found. After drawing two lines, one that connects the highs and the second that connects the lows, you will have a triangle with almost equal angles. Naturally, there has to come to a breakout at some point. When it happens, a new trend will form and it will be strong. According to some research, the direction of the new trend will be the same as the existing one.
When is the best time to enter the trade? You should enter the position when the breakout takes place. And you should trade along with the newly formed trend. Moreover, your position should be opened for 15 minutes or longer.
The ascending triangle pattern
This pattern will typically occur during the uptrend so it is a bullish pattern. When you draw the triangle you will notice that the lower arm of it is equal with the trendline. The upper arm, on the other hand, is synonymous to the horizontal line that forms a resistance level. See the example of the triangle below. You can deduce that the uptrend will be sustained.
The best point to enter the trade is again when the breakout happens. When the price crosses the resistance line you ought to place a buy order of a duration at least 15 minutes.
The descending triangle pattern
In opposition to the previous one, the descending triangle pattern could be identified along with the downward trend. The line that connects the highs will be drawn with a trendline. The line that connects the lows will be a horizontal support line. As you can see in the below chart, you have all rights to expect the downtrend to continue.
You open a sell position when the price breaks out from the support level and reverts to a downward trend. Your position could last 15 minutes or longer.
A few hints on how to trade the triangle patterns on the Olymp Trade platform
In the foreword, I mentioned that the triangle pattern belongs to the trend continuation patterns. This means that whenever you see the pattern is formed you can expect the trend to carry on in the very same direction. Your task is to detect the moment when the price breaks out and a new trend begins.
It is best to use the triangle pattern while trading longer timeframes. You should set the candles to last at least 5 minutes. The chart should show a few hours of price data or even more. Like this, it will be much easier to recognise the triangle pattern. And when you identify it and draw it correctly, you get the bigger chance to enter the trade that will bring you profit.
It might be a good idea to use the triangle pattern together with some indicator, for example, the MACD. Look at the chart below. When the price breaks out the support line, trading volume increases and the lines of the MACD indicator separate. Thus, you get a confirmation of the beginning of a new trend.
I believe you will now be able to recognise the triangle pattern. Put this knowledge into practice. Open the demo account at Olymp Trade and check how the triangles work. Share your comments with us.
Best of luck!
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