Technical analysis figures are undoubtedly important in trading. In one way or another, they are used by both beginners and experienced traders. One of the most popular figures (they are also called patterns) is the “Triangle”.
It is based on simple market logic: price fluctuations decrease before a further breakthrough. On different timeframes, the “Triangle” model can be a figure of trend continuation and reversal. Most of the traders test the triangle trading system on FinmaxFX.
What is the “Triangle” pattern?
This model is formed by the convergence of trend lines to each other. This happens when the activity of traders decreases. There are two types of this pattern:
- An ascending figure.
- A descending figure.
It is sometimes difficult for beginner traders to classify the “Triangle” figure and distinguish it from other patterns of technical analysis. In order to understand how this model is formed, one should follow a certain rule – the first trend reversal point in the triangle itself should be the highest (in this case, the upward trend). In a downward trend, point 1 should have a minimum height inside the pattern.
If this rule is not followed, the model is interpreted incorrectly. However, determining the further direction of the trend is not all. The trader should determine the goal he can achieve. When the price breaks through the triangle boundary upwards, it is necessary to open an order to buy the asset. The minimum goal is the height of the figure itself.
“Bearish” and “bullish” triangles
Traders often call the “Triangle” downward and upward models “bearish” and “bullish”, respectively. A bullish figure is distinguished by the fact that its resistance is almost a horizontal line.
Its appearance indicates that the sellers have formed a certain level, which can no longer be overcome by the buyers. The support looks like rising lows. Characteristically, the oscillation amplitude decreases within this triangle as the price approaches the border crossing point. This pattern is usually a sign of price growth because after the resistance line is broken through, the price moves upwards. “The bullish trend continues. It is better to open a buy order slightly above the resistance line to avoid a false break-down.
In a bearish triangle, on the contrary, the support line looks almost horizontal. The resistance is a series of declining highs. It is the exact opposite of the bullish model.