Technical Analysts and Chartists like to say what they see, so it comes as no surprise that the triangle patterns clearly form the shape of, well, triangles. The basic construct of this chart pattern is the convergence of two trend lines. Flat, ascending or descending - with the price of the security moving between the two trend lines.

There are 3 types of triangle patterns - The ascending triangle, the descending triangle and the symmetrical triangle. While the shape is important, what’s more important is the direction the market moves once it breaks out of the triangle. Triangle patterns are usually continuation patterns, but occasionally they are reversal patterns. Note. The Triangle is not dissimilar to the wedge pattern that we discovered earlier. The difference between the two is that the wedge points up or down i.e at 45 degrees, while the triangle points sideways. Also, the wedge forms a trend where volatility is contracting and the triangle is a consolidation pattern prior to a break-out.The Ascending Triangle.

The ascending triangle is a bullish continuation or reversal pattern created by a bottom support line and a top resistance line. The support line is always drawn against a series of ever increasing troughs, while the resistance line is a horizontal line preventing the price from going higher - so higher lows and the same level highs (See Support and Resistance and why they matter).  It can be seen as a continuation of the prior up trend after a consolidation period, as the first chart "Ascending Triangle Continuation" shows, or is seen as a down trend reversal - forming an upside buying opportunity, as the second chart "Descending Triangle Reversal" shows.

The Ascending Triangle Continuation Example

The Ascending Triangle Reversal Example

The first part of this pattern (as shown in our below example) is the fall to a low that then finds a level of support, which sends the price to a high. The next move is a second test of the previous support level, which again sends the stock higher - but this time to a lower level than the previous move higher. This is repeated until the price is unable to hold the support level and falls below, resuming the down trend.  This pattern indicates that buyers are trying to take the security higher, but continue to face resistance. After several attempts to push the stock higher, the buyers fade and the sellers overpower them, which sends the price lower.
This pattern is identified by symmetry (as seen in the Transocean chart below) formed by a series of lower peaks and higher troughs. Both the increasing support and declining resistance lines act as barriers in a period of weakening consolidation. You’ll may find this pattern unfolding into directionless market – neither the buyers nor sellers are in control, hence the contracting symmetrical range.  The two trendlines in the formation of this triangle should have a similar slope converging at a point known as the apex. The price of the security will bounce between these trendlines, towards the apex, and typically breakout in the direction of the prior trend. As mentioned if the symmetrical triangle is found in an up trend or downtrend it may lend more weight to a break to continue that trend. In our above Transocean example we measure the distance between the triangles top and bottom, just like the ascending and descending triangles. This number forms our profit target by adding it to the break.  Our break is to the upside in this example, but it may have been on the downside. If it was to the down side then the height of the triangle would be subtracted from the break. We place our stop/loss just below the most recent trough.  (If the break was on the downside the stop/loss would be placed just above the most recent peak). Traders will look at trend lines for confirmation that these patterns are forming - as with the other patterns we’ve talked about.  For additional confirmation, volume should weaken as the consolidation matures and increases on the break . You can see this in all our example charts above.  As mentioned several times these triangles are mainly continuation patterns, but occasionally they reverse, so don't anticipate the break and wait for confirmation.

Just be aware that these triangle patterns need other technical analysis to figure them out. They can be hard to spot, so use other indicators and tools help identify these patterns.  As always technical analysis is not an exact science and although these indicators and patterns can increase the probability of making the correct trade, many will go against you and large losses can be incurred. Your own trading strategy needs to be formed and hopefully you'll be on your way to achieving this on completion of this course.

Technical Analysts and Chartists like to say what they see, so it comes as no surprise that the triangle patterns clearly form the shape of, well, triangles. The basic construct of this chart pattern is the convergence of two trend lines. Flat, ascending or descending - with the price of the security moving between the two trend lines.

There are 3 types of triangle patterns - The ascending triangle, the descending triangle and the symmetrical triangle. While the shape is important, what’s more important is the direction the market moves once it breaks out of the triangle. Triangle patterns are usually continuation patterns, but occasionally they are reversal patterns. Note. The Triangle is not dissimilar to the wedge pattern that we discovered earlier. The difference between the two is that the wedge points up or down i.e at 45 degrees, while the triangle points sideways. Also, the wedge forms a trend where volatility is contracting and the triangle is a consolidation pattern prior to a break-out.The Ascending Triangle.

The ascending triangle is a bullish continuation or reversal pattern created by a bottom support line and a top resistance line. The support line is always drawn against a series of ever increasing troughs, while the resistance line is a horizontal line preventing the price from going higher - so higher lows and the same level highs (See Support and Resistance and why they matter).  It can be seen as a continuation of the prior up trend after a consolidation period, as the first chart "Ascending Triangle Continuation" shows, or is seen as a down trend reversal - forming an upside buying opportunity, as the second chart "Descending Triangle Reversal" shows.

The Ascending Triangle Continuation Example

The Ascending Triangle Reversal Example

The first part of this pattern (as shown in our below example) is the fall to a low that then finds a level of support, which sends the price to a high. The next move is a second test of the previous support level, which again sends the stock higher - but this time to a lower level than the previous move higher. This is repeated until the price is unable to hold the support level and falls below, resuming the down trend.  This pattern indicates that buyers are trying to take the security higher, but continue to face resistance. After several attempts to push the stock higher, the buyers fade and the sellers overpower them, which sends the price lower.
This pattern is identified by symmetry (as seen in the Transocean chart below) formed by a series of lower peaks and higher troughs. Both the increasing support and declining resistance lines act as barriers in a period of weakening consolidation. You’ll may find this pattern unfolding into directionless market – neither the buyers nor sellers are in control, hence the contracting symmetrical range.  The two trendlines in the formation of this triangle should have a similar slope converging at a point known as the apex. The price of the security will bounce between these trendlines, towards the apex, and typically breakout in the direction of the prior trend. As mentioned if the symmetrical triangle is found in an up trend or downtrend it may lend more weight to a break to continue that trend. In our above Transocean example we measure the distance between the triangles top and bottom, just like the ascending and descending triangles. This number forms our profit target by adding it to the break.  Our break is to the upside in this example, but it may have been on the downside. If it was to the down side then the height of the triangle would be subtracted from the break. We place our stop/loss just below the most recent trough.  (If the break was on the downside the stop/loss would be placed just above the most recent peak). Traders will look at trend lines for confirmation that these patterns are forming - as with the other patterns we’ve talked about.  For additional confirmation, volume should weaken as the consolidation matures and increases on the break . You can see this in all our example charts above.  As mentioned several times these triangles are mainly continuation patterns, but occasionally they reverse, so don't anticipate the break and wait for confirmation.

Just be aware that these triangle patterns need other technical analysis to figure them out. They can be hard to spot, so use other indicators and tools help identify these patterns.  As always technical analysis is not an exact science and although these indicators and patterns can increase the probability of making the correct trade, many will go against you and large losses can be incurred. Your own trading strategy needs to be formed and hopefully you'll be on your way to achieving this on completion of this course.