TECHNICAL ANALYSIS: TRIANGLES |
Triangles are technical analysis patterns that most often appear on currency charts. They are formed on rapidly developing trends, and almost always serve as continuation figures for the current trend.
There are the following types of triangles:
1. Ascending triangle: formed on an uptrend. In this case, the resistance line drawn through the price peaks runs horizontally, and the support line is located with a vertical slope. Those. The price highs are located at the same horizontal level, while the lows are gradually increasing. (“Bulls are pushing” the price up).
2. Descending triangle – an inverse triangle to the ascending one. It is interpreted exactly the opposite. It is formed on a downtrend, it is drawn with a horizontal line drawn through the lows (resistance line), and an inclined line drawn through the price peaks. (“Bears” push the price down).
3. Symmetrical triangle: Drawn by lines of support and resistance, converging symmetrically at equal angles. It can be formed both on an uptrend and on a downtrend. Displays the consolidation of forces in the market when the potential of buyers and sellers is approximately the same.
The triangle must have at least five elements (highs and lows).
Interpretation of triangle signals:
1. The very appearance of a triangle on the corresponding trend is a reliable signal for the continuation of the current trend in the market.
2. The most important triangle signal is a breakout. Breakout usually occurs at one third of the distance from the apex of the triangle. Older breakouts are not reliable. aging factors are included.
A. A breakout in the direction of the previous trend is almost a 100% signal to buy (when the ascending triangle is broken up), or to sell (when the descending triangle is broken down). The guideline for fixing profits is the level of the triangle’s height applied to the breakout point.
B. A breakout in the direction opposite to the direction of the previous trend may signal the end or change of the trend. Consideration should be given to reversing the position, or opening the other way.
C. When a symmetrical triangle is broken, the position is opened in the direction of the breakdown. Profit-taking is also the level of the triangle’s height applied to the breakout point.
Triangles are classic patterns in technical analysis of the markets, and reflect patterns that have been successfully used in trading for nearly forty years!