Price forms various patterns on the chart. They are used as technical analysis tools to identify the best entry points. Triangles are such chart patterns. They belong to the group of continuation patterns which means they are developing along with the trend.
Today’s guide will discuss the topic of trading with the triangle patterns.
Contents
The triangle pattern identification
To identify the triangle pattern you must first draw it on the chart. First, you will have to find 2 lows and 2 highs as a minimum. Draw two straight lines. One will connect the lows, the second line will connect the highs. Now, spread them to the point where they meet each other. You have just received a triangular shape on your chart. You can use the Segment tool to draw lines. You will find it in drawing tools on the Binomo platform.
Different types of triangle patterns
The triangle is formed when you connect at least 2 lows with a line and 2 highs with another one. They intersect and create the apex of the triangle. Still, the triangles on the chart will look different depending on a situation in the market.
We distinguish 3 types of triangle patterns: the symmetrical triangle, the ascending triangle and the descending triangle.
Now, what is the difference between them and when do they form?
The first type: the symmetrical triangle
The market is ranging when the bulls and the bears cannot decide which way to go. In such conditions, when you join the lows and highs of the price bars, you will receive an almost symmetrical triangle. Its angles will be more or less the same length.
But the market is ranging for some time and then you can observe a breakout. You can expect a strong trend after such a breakout. Moreover, it would most probably be in the same direction as before.
How to trade with the symmetrical triangle? You should enter the market right after the breakout. You should trade along with the trend.
The duration of your transaction depends on the time frame of the chart you are using. With a 5-minute chart, you can hold a position open for around 15 minutes or even more.
The second type: the ascending triangle
The ascending triangle develops typically during the uptrend so it is a bullish pattern. You are able to connect the lows by drawing a trendline. And the resistance line will join the highs. Take a peek at the picture below to see how such a triangle looks like.
The ascending triangle pattern usually announces the continuation of the uptrend. That is why you should open a long position at the moment the price breaks out from the resistance line. The transaction can last 15 minutes at a minimum if you are trading with a 5-minute candles interval.
The third type: the descending triangle
The last type of triangle patterns can be met during the downtrend. This time a trendline connects the highs and the support line joins the lows. You will find such a triangle in the screenshot below.
The descending triangle is a bearish pattern. When you spot it, you can expect that the downtrend will continue. Thus, you should open a short position at the moments of the breakout from the support level. The duration of the transaction is strictly correlated with a time frame of your chart and with the 5-minute chart time frame you can set duration for 15 minutes or more.
A few hints on how to trade with the triangles on Binomo
The triangles are price patterns which are formed by connecting at least two lows and two highs. They develop during the downtrend, uptrend, as well as in the ranging markets. Usually, they tell us that the previous direction will soon continue.
Your job is to recognise the best moment to enter the trade, which is when the price breaks out from the side of the triangle.
It is a good idea to use longer time frames when trading with the triangle patterns. Set the period of the candles for at least 5 minutes. Recognising the pattern will be much easier then.
You can use some indicators to confirm a new direction of the price. The MACD will be perfect for this task. The histogram will increase after the breakout and the lines of the MACD indicator will move further apart.
Remember about the Binomo demo account. It is an excellent place to try new patterns or combinations of chart patterns and indicators. Tell us in the comments section below about your experience with the triangle patterns on the Binomo platform.
Best of luck!