The Ascending Triangle Pattern: What It Is, How To Trade It

ascending triangle pattern

The highs around the resistance price form a horizontal line, while the consecutively higher lows form an ascending line. An ascending triangle pattern predicts a bullish breakout above the resistance area, typically around the time when the ascending line of the triangle would intersect the horizontal resistance line. Essentially, the ascending triangle is telling of the building up of bullish momentum for the continuation of an ongoing uptrend.

Ascending Triangle Pattern – Definition and How To Trade It

ascending triangle pattern

As the stock proceeds further into the triangle pattern over time, volume should also diminish. Ascending triangles indicate a pause or consolidation in price action in a trend. After the initial leg up, the pause is a time for traders to reassess the move by selling or accumulating more shares. Finally, always place a stop loss when trading an ascending triangle pattern. Even a breakout that is accompanied by high volume may fail, either resuming the ascending triangle pattern or initiating a reversal.

Preceding Uptrend

From beginners to experts, all traders need to know a wide range of technical terms. During this period of indecision, the highs and the lows seem to come together at the point of the triangle with virtually no significant volume. Now, this does not mean to say the ensuing breakout or breakdown ascending triangle pattern doesn’t deliver on the hype. What I am saying is the development of the pattern feels slow and arduous. FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade.

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The ascending triangle, often referred to as the ‘rising triangle’, is one of the top continuation patterns that appears mid-trend. Traders anticipate the market to continue in the direction of the larger trend and develop trading setups accordingly. Technical analysis is a type of trading strategy where traders analyze markets and make predictions about future market movements based on past performance. This trading strategy uses tools and techniques to evaluate historical data, including asset prices and trading volumes, rather than business results. Some of the tools used include charts and graphs, including triangles and candlesticks.

Triangle Pattern Timescales

These highs do not have to reach the same price point but should be close to each other. In the study of technical analysis, triangles fall under the category of continuation patterns. There are three different types of triangles, and each should be closely studied. These formations are, in no particular order, the ascending triangle, the descending triangle, and the symmetrical triangle.

The key point is you want to see buyers participate in the move to increase the likelihood of follow-through. The next thing you want to see in a breakout is for volume to accelerate on the move higher. This does not mean the volume on the breakout has to be the highest over the last 20 hours or something. The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms.

Commodity and historical index data provided by Pinnacle Data Corporation. The information provided by StockCharts.com, Inc. is not investment advice. Increasing volume helps to confirm the breakout, as it shows rising interest as the price moves out of the pattern. Many traders make the mistake of buying oversold stocks or selling overbought stocks and suffer financial losses as a result. This often happens when traders are unaware of the proper analytical tool to use.

This breakout is oftentimes accompanied by high volume as well to affirm the on-going trend. The ascending triangle is a bullish continuation pattern and is characterized by a rising lower trendline and a flat upper trendline that acts as support. This pattern indicates that buyers are more aggressive than sellers as price continues to make higher lows. The pattern completes itself when price breaks out of the triangle in the direction of the overall trend. Technical analysis requires a great deal of practice and patience.

The other key piece is the clear resistance level with a series of highs occurring at or near the same price. [1] You don’t want to have one or two peaks, this my friend is just a swing high or double top. The first key component of the formation is a series of higher lows. Jay and Julie Hawk are the married co-founders of TheFXperts, a provider of financial writing services particularly renowned for its coverage of forex-related topics. While their prolific writing career includes seven books and contributions to numerous financial websites and newswires, much of their recent work was published at Benzinga. Ascending triangles are most effective when they appear within the context of an uptrend.

The setup for this failure is the stock makes a new daily high with strength. Both price and volume action looks great and then the stock begins to stall. Next, notice how the stock breaks down through the uptrend line, only to shoot out the top. I remember how I would read a book on a specific chart pattern and then when I would go in the market, I could never find an exact match. Remember, with technical analysis, if you don’t keep it simple, you will begin to see things that aren’t even there on the chart.

Low float stocks are a type of stock with a limited number of shares available for trading, which tends to cause… Stock moving averages can be calculated across a wide range of intervals, making them applicable to both long and short-term investment strategies. When navigating the financial markets, traders can choose from a number of tried-and-true strategies. Short squeezes can introduce a lot of volatility into stocks and send share prices sharply higher. These squeezes offer opportunities for trading, but they often require different strategies and more caution than traditional breakouts. For every bullish breakout that hits the upward target perfectly, there will be another batch of trades that outright fail or the move higher is anything less than stellar.

As mentioned, traders look for volume to increase on a breakout, as this helps confirm the price is likely to keep heading in the breakout direction. If the price breaks out on low volume, that is a warning sign that the breakout lacks strength. A minimum of two swing highs and two swing lows are required to form the ascending triangle’s trendlines. But a greater number of trendline touches tends to produce more reliable trading results. In trading, a bearish pattern is a technical chart pattern that indicates a potential trend reversal from an uptrend to a downtrend.

Secondly, try to identify the upper resistance line with at least two highs which will help you determine the upper line. For trading purposes, an entry is typically taken when the price breaks out. Buy if the breakout occurs to the upside, or short/sell if a breakout occurs to the downside. A stop loss is placed just outside the opposite side of the pattern. For example, if a long trade is taken on an upside breakout, a stop loss is placed just below the lower trendline. The triangle pattern is a popular chart pattern that is often used by technical analysts to identify potential breakout opportunities.

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Welcome to the world of technical analysis, where chart patterns play a pivotal role in shaping trading strategies. This is an ultimate guide designed to help users objectively identify the existence of patterns, define the characteristics and classify them. In this discussion, we will mainly concentrate on the patterns formed by trend line pairs. Triangle patterns are most commonly applied on daily charts and interpreted over a period of several months.

Regardless of where they form, ascending triangles are bullish patterns that indicate accumulation. The direction and strength of the breakout is extremely important. Strong breakouts will come with a spike in trading volume, especially for uptrends, and will move at least several percent of the price as well as last for several days. As you navigate the complexities of the foreign exchange market, understanding chart patterns like the ascending triangle can elevate your currency trading game to new heights.

  1. It does, however, have its shortcomings and traders ought to be aware of both.
  2. We are opposed to charging ridiculous amounts to access experience and quality information.
  3. This is an ultimate guide designed to help users objectively identify the existence of patterns, define the characteristics and classify them.
  4. In the example below, the US dollar basket on IG had shown a breakout on the upside.
  5. However, if you are trading the pattern in a classic sense, failure is when it breaks down and falls out the bottom of the upward trend line or the stock briefly breaks out, only to rollover.

The profit target for the setup is the distance of the triangle added to the top. The potential issue with this approach is you are exposed to more risk as you are buying at higher levels with greater downside exposure. I like to wait for a key pivot point resistance level to be breached and then place a buy order slightly above this level.

ascending triangle pattern

A symmetrical triangle pattern occurs when the price forms both a rising trendline and a falling trendline, resulting in a converging triangle shape. This pattern indicates a period of consolidation and indecision in the market, with no clear bullish or bearish bias. Traders often wait for a breakout above or below the triangle to determine the direction of the next significant move.

At this point, you could check to see if the pair’s trading volume has risen sharply to provide a reliable confirmation signal. If that is the case, you could enter into a long position in EUR/USD anticipating further upward movement in that currency pair’s exchange rate. It’s important to treat day trading stocks, options, futures, and swing trading like you would with getting a professional degree, a new trade, or starting any new career.

It’s as if a large sell order has been placed at this level, and it’s taking several weeks or months to execute, thus preventing the price from rising further. Even though the price cannot rise past this level, the reaction lows continue to rise. It’s these higher lows that indicate increased buying pressure and give the ascending triangle its bullish bias. The ascending triangle is an incredibly helpful pattern when assessing potential trend continuations. It does, however, have its shortcomings and traders ought to be aware of both. The Head and shoulders pattern is a reversal trading strategy, which can develop at the end of bullish or bearish trends.

The narrower the wedge gets, the stronger the breakout usually is. The descending triangle is recognized primarily in downtrends and is often thought of as a bearish signal. As you can see in the above image, the descending triangle pattern is the upside-down image of the ascending triangle pattern. The two lows on the above chart form the lower flat line of the triangle and, again, have to be only close in price action rather than exactly the same.

Demand and Supply theory is the perfect solution for technical analysts. It’s important to consider market conditions, overall trends, and other factors that may impact the price movement. To find an ascending triangle pattern, look for a stock that had a strong uptrend and is now trading sideways. A horizontal area of resistance should be clearly visible in the chart, while drawing trendline across the stock’s lows should yield an ascending line. Wait for a significant candlestick close above the resistance level to validate the pattern. You want to have the patience to wait for clear signals and avoid impulsive decisions.

Despite being a continuation, traders should look for breakouts before they make a move to enter or exit a position. An ascending triangle is a chart pattern used in technical analysis. It is created by price moves that allow for a horizontal line to be drawn along the swing highs and a rising trendline to be drawn along the swing lows. This trend generally forms during consolidation within an uptrend.

One trend line is horizontal, while the other connects different price points as it heads up. An ascending triangle pattern consists of several candlesticks that form a rising bottom and at least two to three peak levels that form a flat top due to horizontal resistance. The rising bottom is formed using trend lines connecting at least two to three higher lows.

This pattern emerges when the price movement allows for a horizontal line to be drawn across the swing highs, while a rising trendline is drawn along the swing lows. Traders actively monitor triangle patterns for potential breakouts, which can occur either upward or… As outlined earlier, the continuation of an uptrend takes a specific form. This form, in this case the ascending triangle, helps us define the trading environment. On one hand, a break of the upper trend line signals the continuation of the bullish trend.

This is true of any type of trading tool used in this strategy, including triangle chart patterns. It’s important to keep in mind that the market is very unpredictable and can swing in any direction even if these tools can be used to make predictions about trends. If you’re going to use triangle patterns, make sure you take positions only after you confirm a breakout in the price action of the security in question.

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This type of price action could be related to the announcement of a shelf offering or the execution of an “at-the-market” sale from… This helps in the scenario where the stock rolls over and breaches the uptrend line, but does not break the low of the breakout candle. You will see these shakeouts occur right before a stock really takes off. The difference is the uptrend line follows the trend, while the stop below the breakout candle is fixed. If the stock is able to break out, you can place your stop below the low of the candlestick. This way if the stock rolls over, you are not waiting until the uptrend line is breached.

This leaves room for the stock to test the horizontal band as new support, but protects you from larger losses in case the breakout fails. Another thing to keep in mind is that a breakout becomes more likely as an ascending triangle progresses. The breakout may also be stronger if the resistance area has been tested numerous times already as the ascending triangle pattern formed. First, price action prior to the formation of an ascending triangle is relevant.

Take the difference between the resistance line and lowest low, and add that to the resistance line at the breakout. To illustrate the application of the ascending triangle pattern to forex trading, consider a hypothetical trade setup as follows. Waiting for confirmation is smart; do not get caught in a fake-out breakout. Be sure to have enough information to make a smart and informed trade. This article will help you understand how to identify and trade the ascending triangle pattern.

For whatever reason, with each new higher low, the bulls become slightly more aggressive. As the bulls persist, they set higher lows in the upward-moving bottom trend line. The bottom trend line needs at least two lows to form the lower trend line. Higher lows are needed because the line is not straight across; it moves at an angle. Sign up now for FREE access to our exclusive trading strategy videos. Explore our Trade Together program for live streams, expert coaching and much more.

Whether you’re a seasoned trader or just getting started, mastering your day trading psychology can help you achieve your objectives. Many traders often underestimate the power of day trading psychology in achieving positive results. Recently, we discussed the general history of candlesticks and their patterns in a prior post. We also have a great tutorial on the most reliable bullish patterns. Have you ever seen a stock exhibiting normal trading behavior and then all of a sudden the stock price drastically drops out of nowhere?

Ascending triangles typically form after a strong uptrend, not after sideways price action. Place a stop loss just below the ascending trendline to limit potential losses if the breakout fails. As for profit targets, consider using the measured move method by measuring the height of the triangle’s vertical side and adding it to the breakout point. Don’t risk more than you can afford to lose and determine an appropriate position size to establish based on your risk tolerance and the size of your trading account. The target for an ascending triangle breakout is close to the equal price difference of the widest part of the triangle area. Then add the difference between the resistance area and low to the resistance level at the breakout.