An ascending triangle is one of the well-known price action patterns in Forex trading.
Investors use various tools to assess the market direction, including technical indicators and chart patterns. Triangles are one of the available numerous chart patterns.
You make money from losing traders’ stop orders, which is why it works. This is a terrific chart pattern if traded correctly.
As a result, I’ve created a complete tutorial on trading the Ascending Triangle.
Finding an ascending triangle on forex charts?
Now, if you trade the Forex markets on your own, you’re probably not going to look at charts with triangles already drawn on them. After all, if everyone in the market were looking at identical cheat sheets, you’d have no advantage!
So, let’s learn how to spot an ascending triangle so you can use it in your forex trading strategy. Then, for ease of reference, we may create a step-by-step tutorial:
But first, wait for the market to revert to its positive trend.
When the market is rising, the rising triangle is advantageous. However, even if you spot it in your squiggly lines, it may not react as expected if the market falls.
The market is consolidating.
Ascending triangles are more likely to emerge while the market is consolidating.
Keep an eye out for the rising lower trendline
Find security whose lows are constantly climbing. This suggests that buyers are driving up the price.
Find the flat upper line
Then you’ll need steady resistance lines. This means that there will be a tipping point.
Allow the current trend to continue
Your rising triangle is confirmed when the price breaks through the upper trendline.
Ascending triangles can appear as reversal patterns after a downturn, although it is more often a bullish trend continuation pattern.
Ascending triangles are bullish triangle patterns that signal accumulations. The Ascending Triangle is nearing resistance with a succession of higher lows.
This is an indication of power for three reasons:
- Buyers are willing to pay a higher price.
- There is no compulsion to sell.
- Buy-stop orders are grouped above resistance.
Let me clarify.
Buyers are willing to pay higher costs
Here’s how it works:
Rising lows will not create resistance if buyers are reluctant to pay more amazing prices.
The market’s ability to generate a series of higher lows demonstrates demand even as prices climb.
No selling pressure
If there is considerable selling pressure, the price should not be able to remain at resistance for long. As a result, it should plummet quickly.
Even at an “attractive” level, if the price continues around resistance, it signals a lack of selling pressure.
Using the ascending triangle pattern
Because the ascending triangle is a positive indication, the supporting ascension line should be constantly watched because it indicates that bears are gradually exiting the market. Bulls (or buyers) can then push security prices over the resistance level depicted by the flat top line of the triangle.
As a trader, you should be wary about starting trades before prices break above the resistance line, as the pattern may fail to form ultimately or be disrupted by a move to the downside. However, the danger of waiting for a verified breakthrough is lower. Buyers can then set sensible stop-loss orders below the low of the triangle formation.
How to use an ascending triangle?
While many traders know how to use an ascending triangle, many are unaware that the pattern has a built-in profit-calculating strategy.
It’s a simple strategy with only two stages to determine how much profit a trader should strive for or may expect following the breakout in this pattern, indicating that the existing trend must continue.
The first of the two steps is to calculate the distance between the lowest point on the bottom trendline and the flat top line at the start of the pattern. The second stage measures the potential profit from the break-even point over the same distance.
The trader might use this approach to seek for-profit and properly plan his trading.
Avoid making this common mistake while trading the Ascending Triangle chart pattern (that most traders never realise)
Most trading books will tell you to sell when the price is at resistance, right?
But here’s the catch.
Because the price must be observed as it approaches a resistance level, not every resistance level is acceptable for shorting.
When to enter the trade when trading ascending triangle?
Before I show you how to trade triangle chart patterns, it’s a good idea to understand when it’s optimal to enter a trade when trading the Ascending Triangle chart pattern.
There are three possibilities, as given below.
Stop Order
This strategy goes long when the price trades above the highs of the Ascending Triangle.
You must place a buy-stop order and be declared a member once the price trades above the highs.
If the breakout is valid, this is one of the most attractive opportunities to enter. The downside is that this might be a false breakout.
Break and Close
This method is the same as the last one.
The primary difference is that you wait for the price to break through and close above the highs. It decreases the possibility of a false breakout.
You’ll have to enter your trade at a considerably higher price if the momentum is high.
Retest of a trendline
If you’re a competent trader, you could even be able to enter the breakout before it occurs. How long when the price retests the trendline (of the Ascending Triangle)?
This is fantastic.
So now, in the next part, we’ll learn about proper stop-loss, which is the main thing when entering the trade.
Proper Stop Loss
The principle is the same whether you trade ascending triangles, breakouts, or other methods. The stop loss should be established so that the trading arrangement is null and void if exceeded. Another way is when the market hits the stop loss, you will know you were wrong.
Winning exits
Let us now go to the winning exits. You should think about two approaches right now. The first is the trailing stop loss, and the second is the price estimate. After that, we’ll go through each one in further detail.
The Trailing Stop Loss
Because you don’t know how long the main trend will persist, you should trail your stop loss and “lock in” profits whenever the market advances in your favour. You might do this using a moving average technical indicator.
You may use a 50-period moving average to track a stop loss when you are long. However, to be more specific, You must keep your position until the market falls below the 50-period moving average.
The Price Projection
A classic charting method is also utilised to anticipate where the price will be. You might use it to ascend chart patterns.
There are two ways to make the ascending triangle pattern function. First, measure the width of the present ascending triangle from high to low: two, double the amount on the price prediction’s breakthrough level.
How to trade the ascending triangle chart patterns?
While trading the ascending triangle, traders must notice the rise. As the forex candlesticks begin to consolidate, the rising triangle appears. Once the triangle has formed, traders may utilise the measuring technique to forecast the breakout.
Following a strong break-over resistance, traders can open a long position with a stop at the most recent swing low and a take-profit goal determined by the measurement technique.
Trading techniques using the ascending triangle pattern
Several trading strategies are based on the ascending triangle pattern. Although this pattern is evident, there are numerous ways to cope. The steps are as follows:
False ascending triangle
At the outset of this piece, we indicated that the ascending triangle suggests a favourable price trend movement. This legislation, however, is not always applicable.
For example, if the bulls cannot raise the price, the Forex market may turn in the opposite direction. This method shows how to deal with an improper ascending triangle:
It is advisable to get pattern approval first. Never open a position before there has been a breakthrough. For instance, if the price breaks through the support line of an ascending triangle pattern, you should enter a sell trade.
Set a profit level at this time. To determine the distance, count the number of pips from the beginning of the triangles to the highs. The precise number of pips may be selected starting from high at the triangle’s base.
Stop-loss orders can be set a few pips above the support and resistance levels. Generally, you should change this quantity by 3 to 10 pips, depending on the time interval.
Triangle Patterns arise in a variety of ways. The ascending triangle has smoother upper highs, whereas the descending triangle pattern has rougher lower highs. The ascending triangle’s floor features a slope of higher lows, but the bottom half of the descending triangle pattern seems smooth.
True ascending triangle
The rising triangle pattern index is the most often used and effective trading method.
First, you must wait for the rising triangular pattern to shape.
Expect a breakthrough. The price should end at the resistance level. Then you must open a long position.
To establish the profitability level, count the number of pips from the bottom of the triangle to the horizontal line.
Each technical analysis methodology has pros and downsides in financial markets. Let us examine the advantages and disadvantages of Ascending Triangle.
How does an ascending triangle pattern differ from symmetrical triangle Patterns?
A symmetrical triangle on a chart represents a price action pattern in which the tops of the bars are lower, and the bottoms are higher. In addition, the two lines of the symmetrical triangle are inclined at the same angle. In this way, the triangle acquires its symmetrical character.
It is usually unclear in which direction the breakout will take place in a symmetrical triangle pattern. This is because both bullish and bearish movements are equally strong, as seen in the price action.
Eventually, a symmetrical triangle breakout will induce a price move corresponding to the size of the pattern. For that reason, it is imperative to identify potential breakouts at the upper and lower levels of the symmetrical triangle to take advantage of the market’s opportunity.
The size of the triangle formation determines the potential target. A measured move technical analysis will determine whether an upward or downward breakout is expected from a symmetrical triangle.
How Descending Triangle differs from ascending pattern
It has already been mentioned that the ascending and descending triangles are mirror images of each other. Therefore, the descending triangle pattern has the opposite characteristic. Under the price action, there is a flat side to the descending triangle. An upward slope is present on the upper side of the triangle. The descending triangle has a bearish potential equal to the pattern’s size in a bearish market. Consequently, descending triangle patterns open short positions after the price breaks the lower (flat) boundary.
When the descending triangle is formed during a bearish price trend, we should expect the trend to continue.
It is important to mention that sometimes the ascending and descending triangles break through the inclined level, which can result in false signals. The same applies to the horizontal price zone. It is always a good idea to wait for the candle to close before confirming a breakout. In this way, false signals will be reduced to a great extent.
Pros of ascending triangle
- Simple to recognise the pattern
- Because this is an intermediate-term pattern, traders can trade inside it but should limit transactions to the trend’s direction.
- Based on the maximum height of the rising triangle, it generates a fundamental goal standard.
- In contrast to other triangle patterns that indicate a trend reversal, these are continuation triangle patterns.
- When applying the measurement approach, profit objectives are evident.
- It can be found at any moment.
Cons of ascending triangle
- False breakouts are a possibility (traders need to manage risk accordingly)
- There is always the risk that the price will remain sideways for an extended time or perhaps fall.
- It is unusual to see it in perfect configuration.
- The placement of stop-loss orders is not adequately defined.
- Day traders and scalpers will benefit more from this strategy.
- It may generate false signals.
- It doesn’t frequently occur on the price chart.
Bottom line
One of the most fundamental and practical patterns is the ascending triangle, which capitalises on consumer supply and demand mismatches.
With the ascending triangle, you may be able to spot the trade opportunity before it occurs. As a result, understanding the ascending triangle pattern may be a valuable strategy for identifying profitable trades.