Triangle patterns are consolidation formations that typically lead to continuation of the prior trend. They form as price action contracts into a narrowing range before breaking out.
Types of Triangles
Ascending Triangle
Structure:
- Flat top (horizontal resistance)
- Rising bottoms (higher lows)
- Converging lines
Bias: Usually bullish
Descending Triangle
Structure:
- Flat bottom (horizontal support)
- Falling tops (lower highs)
- Converging lines
Bias: Usually bearish
Symmetrical Triangle
Structure:
- Lower highs
- Higher lows
- Both lines converging equally
Bias: Neutral (breaks either way)
Ascending Triangle
Formation
How It Forms:
- Price hits resistance, pulls back
- Makes higher low
- Tests resistance again
- Makes another higher low
- Pattern tightens
Psychology
What's Happening:
- Buyers getting aggressive (higher lows)
- Sellers defending level (flat top)
- Buyers eventually overwhelm sellers
- Breakout occurs
Trading Ascending Triangle
Entry:
- Buy on break above resistance
- Or on retest of breakout
Stop:
- Below most recent higher low
- Or below triangle
Target:
- Height of triangle projected up
Volume
Ideal:
- Decreasing during formation
- Increasing on breakout
Descending Triangle
Formation
How It Forms:
- Price hits support, rallies
- Makes lower high
- Tests support again
- Makes another lower high
- Pattern tightens
Psychology
What's Happening:
- Sellers getting aggressive (lower highs)
- Buyers defending level (flat bottom)
- Sellers eventually overwhelm buyers
- Breakdown occurs
Trading Descending Triangle
Entry:
- Short on break below support
- Or on retest of breakdown
Stop:
- Above most recent lower high
- Or above triangle
Target:
- Height of triangle projected down
Volume
Ideal:
- Decreasing during formation
- Increasing on breakdown
Symmetrical Triangle
Formation
How It Forms:
- Lower highs forming
- Higher lows forming
- Both lines converge
- Creates apex point
Psychology
What's Happening:
- Neither side dominant
- Equilibrium forming
- Compression of energy
- Will break one direction
Trading Symmetrical Triangle
Entry:
- Wait for breakout direction
- Trade the break (up or down)
- Don't guess direction
Stop:
- Opposite side of triangle
- Or beyond breakout candle
Target:
- Height of triangle projected
Trend Context
More Likely: Breaks in direction of prior trend
Statistics: no fixed rate can be relied on. In tests for Forex Trading Strategies (ch. 3), the ascending triangle came out negative; treat the pattern as a place to put a stop, not as odds.
Triangle Measurements
Height Measurement
Process:
- Measure widest point of triangle
- From top to bottom
- This is the height
Target Projection
Method:
- Take height measurement
- Project from breakout point
- In direction of break
Example
Setup:
- Triangle high: $55
- Triangle low: $50
- Height: $5
- Breakout at: $55
- Target: $60 ($55 + $5)
Triangle Trading Rules
Entry Rules
Wait For:
- Clear triangle formation
- At least 4 touch points
- Breakout with volume
- Confirmation close
Stop Loss Rules
Place:
- Beyond opposite boundary
- Or beyond last swing
- Define risk clearly
Target Rules
Use:
- Height projection
- Previous support/resistance
- Fibonacci extensions
Volume in Triangles
Formation Phase
Characteristic:
- Volume decreases
- Less activity
- Coiling action
Breakout Phase
Requirement:
- Volume should increase
- Confirms validity
- Shows conviction
Warning Signs
Caution:
- Breakout on low volume
- May be false break
- Wait for confirmation
False Breakouts
Common Occurrence
Reality:
- Triangles can false break
- Price returns inside
- Tests patience
Avoiding False Breaks
Methods:
- Wait for close beyond triangle
- Require volume confirmation
- Use filter (% beyond line)
Trading False Breaks
Strategy:
- Failed break = trade opposite
- Trapped traders fuel move
- Quick reversal signal
Triangle Timeframe
Formation Time
Guidelines:
- Should take some time
- Not too quick (few bars)
- Not too long (loses energy)
Breakout Zone
Typical:
- Occurs in final third of triangle
- Before apex reached
- Energy releases
After Apex
Caution:
- Triangle loses meaning
- Pattern may fail
- New analysis needed
Common Mistakes
Guessing Direction
Problem: Anticipating breakout direction
Solution: Wait for actual break
Trading Too Early
Problem: Entering inside triangle
Solution: Wait for confirmed break
Ignoring Volume
Problem: Not checking volume
Solution: Volume must confirm
Wrong Triangle Type
Problem: Misidentifying pattern
Solution: Check structure carefully
Triangle Checklist
Before Trading
- [ ] Triangle type identified
- [ ] At least 4 touch points
- [ ] Volume decreasing
- [ ] Breakout occurred
- [ ] Volume increased on break
- [ ] Stop placed
- [ ] Target calculated
Key Takeaways
- Three triangle types: ascending, descending, symmetrical
- Ascending = bullish bias
- Descending = bearish bias
- Symmetrical = neutral, follow trend
- Wait for breakout confirmation
- Volume should decrease then increase
- Measure height for target
- Watch for false breakouts
What's Next?
Learn about wedge patterns.
This article is for educational purposes only and does not constitute financial advice.