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What is a Triangle Chart Pattern?

The triangle pattern is a specific figure formed on the price chart, typically identified when the tops and the bottoms of the price action are moving toward each other like the sides of a triangle. When the upper and lower level of a triangle interact, traders expect an eventual breakout from the triangle. As such, many breakout traders use triangle formations for identifying breakout entry points.There are different kinds of triangles that can be seen on a Forex chart. Before you jump into triangle trading you should understand the difference between the formations. We will now take a closer look at the various triangle chart patterns and the corresponding trade setups. Once you are equipped with this knowledge, you should be able to add a triangle trading strategy to your trade setup arsenal.

Ascending/Descending Triangle

These types of triangles have one flat horizontal side, and one sloping side, which is moving toward the flat horizontal side. The Ascending and Descending Triangle patterns are a mirror image of each other. They are identified as Ascending or Descending depending on which side is the flat horizontal side, and which side the slope is on.

Ascending Triangle Pattern

This triangle pattern has its upper side flat, and the lower one ascending. In this manner, the tops of this triangle are on the same level and the bottoms are increasing. This type of triangle typically has a bullish character. When you spot this triangle on the chart, you should be prepared to catch a bullish price move equal to at least the size of the triangle. In this manner breakouts through the upper level (the flat side) are used for setting entry points for long positions. The Ascending triangles are marked green automatically on the MT4 platform with this indicator. When an ascending triangle is formed during a bullish trend, we expect a continuation of the trend.

Descending Triangle Pattern

 The ascending and descending triangles are a mirror image of each other. As such, the descending triangle pattern has the opposite characteristic. The flat side of the descending triangle is below the price action. The upper side of the triangle is inclined downwards. In a bearish market, the descending triangle has a bearish potential equal to at least the size of the pattern. For this reason, the descending triangle is used to open short positions after the price has broken its lower (flat) side. Decending Triangle patterns are automatically colored red on the MT4 platform with this indicator. When the descending triangle is created during a bearish price tendency, we expect the down trend to continue.

It is very important to mention that the ascending and the descending triangles sometimes break through the inclined level, causing false signals and trapping some traders along the way. You should always try to wait for the close of the candle to confirm the breakout. This will help reduce many of the false signals.