Triangle

    By
    Andrey Orlov
    -
    0

    A triangle is a chart pattern that forms when neither the buyers nor the sellers are able to push the market price in a particular direction.

    The pattern forms when the price slowly converges and buying and selling happens at lower and higher prices, respectively. The resulting formation appears as a triangle pattern.

    There are three different types of triangles:

    Symmetrical triangle

    The symmetrical triangle forms when price is consolidating horizontally. The balance in power between the buyers and sellers appears to be equal. At some point, the price will break through the pattern; however, the direction is unknown. It is always best to wait for the breakout to occur before entering the market.

    In this particular example, the price broke out to the downside (1).

    Ascending triangle

    An ascending triangle forms when the price is consolidating with a bias towards the upside. The buyers are gaining strength in comparison to the sellers because they are able to create higher lows. They put pressure on the horizontal resistance level and a breakout is likely to happen. However, the direction of the breakout can be unknown, because it is still uncertain whether buyers will manage to break through the resistance level.

    In the example below, buyers could not break through the resistance level and sellers came in to push the price down (1).

    Descending triangle

    The descending triangle forms when the price is consolidating with a bias to the downside. Sellers are gaining strength in comparison to buyers, as they are able to make lower highs. They put pressure on the horizontal support level and a breakout is likely to happen. Again, the direction of the breakout is unknown.

    In this example, the sellers failed to break through the support line and the buyers entered the market in sufficient quantities to push the price up (1) further.
    The important thing to remember is that a breakout is likely to happen when you observe one of these chart patterns. The direction, however, will always remain uncertain, so it is prudent to wait for confirmation before entering a position in the market.