Ascending Triangle Explained
Triangle patterns signal a big price change. Learn how to use them to make a profit when the breakout happens.
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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
What would you buy with a million dollars?
Now, we know a million’s not what it used to be—maybe your plans are closer to the billion range now. But still, a million is enough to buy that dream house, or that dream yacht, or take that dream vacation—unless it’s to outer space. 🚀
For most of us who trade on the open markets, making money is the goal. But if you really want to make money—and we’re talking enough to see all the sights in Italy plus put in that pool—you need to learn how to analyze price fluctuations and find patterns.
These are simply the building blocks of any successful trading strategy. 🏆
While watching the news and understanding things like the dollar edging higher amid declining unemployment rates is a huge part of trading forex, there are mathematical patterns to watch out for. That’s where this guide comes in.
One of these useful patterns is the ascending triangle—and knowing how to use it to analyze price moves can help you determine the best bet to place. In this guide, you’ll learn what this triangle is, how it works, and the benefits and risks of using it to trade.
Ready? Let’s dive in!
- What are Triangle Patterns?
- How the Ascending Triangle Works
- Important Elements
- Finding the Ascending Triangle
- What it Indicates
- Analysis & Methods
- Trading with the Ascending Triangle
- Risks
- Pros and Cons
- Ascending vs. Descending Triangles
- Conclusion
- Get Started with a Forex Broker
What are Triangle Patterns? 🔎
Triangle patterns are frequently used by investors. Even if you’re just starting out in forex, they can help you understand market patterns. In particular, triangle patterns can help you see whether a bullish or bearish market is continuing or is about to reverse.
You know those squiggly graphs with price movements, right? Even though the forex market hit a pre-pandemic low for volatility in July 2021, there are basically some price fluctuations no matter what. If you draw a line across the high points, and then draw a line across the low points, and they look like they’ll eventually meet in a triangle, then you have a triangle pattern.
The significance of the triangle pattern is the breakout point. This means the point when the price will inevitably leave the triangle: either flying upward to new highs or downward to new lows. Breakout points are really why traders are interested in triangles—after all, if you can anticipate a major change in price, you stand to make real money off that change.
There are three types of triangle patterns: ascending triangles, which are bullish indicate an upside breakout; descending triangles, which are bearish and indicate a downside breakout; and symmetrical, where the breakout may happen on either side. In this guide, we’ll primarily be analyzing ascending triangles. Still, it’s important to be able to spot all three so you don’t use the wrong kind of triangle and thus make the wrong kind of trade.
How Does the Ascending Triangle Work? 🏗
Now, let’s focus on just one type of triangle pattern: the ascending triangle. As investors worry about complacent forex markets, you can stay ahead of the curve by learning new techniques for spotting a market reversal.
Ascending triangles indicate that the price will likely go higher—meaning, they’re a bullish pattern. The two trendlines, which are the lines drawn connecting the high points and the low points, create a triangle that’s pointing upwards.
Usually, the top line is fairly flat, while the bottom line is going up. This means that while the highs are staying the same, the lows are getting higher—indicating that we’re likely to reach a new high soon.
Each time sellers try to sell their stock, they’re less and less successful. After a while, we hit the breakout point—the price goes through the top line (also known as the resistance line), and we reach a new high.
Ascending Triangle Elements 👇
We’ve been throwing a whole lot of words around—let’s make sure you’re really confident about each element that you need to understand in the ascending triangle pattern.
The first thing you need for an ascending triangle is the trend. It doesn’t matter how long the trend has been going on—you just need to see one. You can look at a stock chart and tell whether the price is overall trending upward or downward.
Next, check out the top horizontal line. This is the resistance line, and it’s formed by connecting at least two high points. They should be separated by a low point, and they don’t have to be exactly the same—just close.
Now, we have the lower ascending trend line. This line is created by connecting the low points of the security price. For an ascending triangle, these should be going up, and you need at least two of these lows to create a trend line.
The duration of the pattern can be anywhere from a few weeks to many months. Typically, they last 1-3 months. You might see the volume contract, and then expand during the breakout—though this doesn’t always happen to confirm the breakout.
After the breakout, you should see the horizontal resistance line turn into the new support line of the new price. This is called a return to breakout. You can then establish the target price by measuring the pattern’s widest distance and applying that to the resistance breakout.
How to Find an Ascending Triangle 🗺
Now, if you are trading on the stock and forex markets by yourself, you probably won’t be looking at charts where the triangles are already drawn for you. After all, then you wouldn’t have any advantage over anyone else in the market—we’d all be looking at the same cheat sheets!
In a time when cases are brought for exchange rate-rigging, making the market a skewed playing field at times, and banks are tightening regulations in response to algorithmic trading, it’s important to keep any advantage we can get.
So, let’s figure out how to spot an ascending triangle so you can add this to your strategies for trading forex. We can put this into a step-by-step guide for easy reference:
- Wait for a bullish market. The ascending triangle is only useful when the market is trending upward. Even if you find it in your squiggly lines, if the market as a whole is trending downward, it may not behave as expected.
- Market consolidation. When the market is consolidating, that’s when ascending triangles are most likely to appear.
- Find the rising lower trendline. Now, find a security whose lows are getting higher and higher. This means buyers are pushing up the price.
- Find the flat upper trendline. Next, you want a steady resistance line. This indicates that there is going to be a breakout point.
- Let the trend continue. Confirm your ascending triangle when the price has a strong breakout over the upper trendline.
What an Ascending Triangle Can Tell You 📢
So, now you know a whole bunch of fancy vocabulary and how to look at a chart. But what are you supposed to do with all this information?
Triangles are usually most useful after the breakout point. This is when traders will aggressively buy or sell, depending on what kind of triangle it is. If the breakout goes to the upside (as in an ascending triangle), that means it’s time to buy. If it occurs to the downside, that means it’s time to sell.
As we mentioned, volume can indicate whether a breakout is strong. If there’s an increase in volume during the breakout, that usually means it will continue. While increased volume isn’t necessary, lower volume can indicate a weak breakout, or even a false breakout.
Then, traders can set a stop loss just outside the opposite side of the pattern. For example, if you put a long trade on an upside breakout, then you would want to place a stop loss just below the lower trendline. The leading forex brokers will allow you to place these safeguards to keep the price from falling too far.
How to Analyze an Ascending Triangle 📈
Let’s look at an actual example of an ascending triangle. This is an example of a triangle forming during a downtrend, and breaking out below the lower line. The breakout triggered an entry of a short position, and the trader could place a stop loss above the upper line.
How to Trade Using Ascending Triangles 🎯
So, maybe you’ve been watching the struggling gold prices and decided to dip your toe into securities trading. You now have the tools in your toolbox to get ready to trade using ascending triangles.
Let’s say you’ve gone through all the steps above, and you’re confident that you’ve found an ascending triangle. Great job!
The triangle happens as the candlesticks consolidate. Once the triangle forms and you can see a breakout coming, you’re almost ready to enter your trade. Your entry point should be just after you see a breakout above the resistance line. Enter a long position, set a stop below the support line, and set a profit target.
So how do you identify a good profit target? Go to the start of the triangle pattern. Take the distance between your horizontal top line and your trending bottom line. (A to B). This is the distance of breakout you can expect: so take that same distance from the point of breakout, and you’ve got your profit target.
Risks of Using Ascending Triangle ⚠️
Of course, everything comes with both good and bad. The ascending triangle technique is easy to find, and it offers you a clear, mathematically calculated profit target. Also, since it’s a mid-term pattern, you may be able to trade within the triangle, with an eye to where it’s headed.
On the flip side, it is possible for triangles to have false breakouts. This could lead to a bad trade. It’s also possible that the price will just move sideways, and you’re stuck waiting for it to do something real.
The Good and the Bad with the Ascending Triangle:
Pros
- Easy to learn and find
- Calculable profit target
- Can trade within the triangle as it continues over time
Cons
- False breakouts
- Price could move sideways
Ascending Triangle vs. Descending Triangle 🔺🔻
Now, it’s important that you don’t confuse one kind of triangle pattern for another. They operate differently, so you need to set the right trades.
Luckily, you can tell pretty easily whether a triangle is ascending or descending. If the top line is horizontal, that’s an ascending triangle. If the bottom line is horizontal, that’s a descending triangle. Write it on an index card and tape it to your screen if you have too!
Conclusion 🏁
You now know the basics of trading with the ascending triangle—and it’s time to rake in that million! Well, we’re not making any promises, but you can at least use tools like this to get closer and closer to that dream vacation. We’re already fantasizing about beaches…
When you’re scanning price trends, you can now keep an eye out for triangle patterns. Make sure to check how the market is trending, since that can impact how a triangle will break out. Just by reading through this guide, you’re now better equipped to make strong trading choices, and place winning bets—and that’s what it’s all about!
📖 Ready for more advanced techniques? Learn how to use harmonic patterns.
Ascending Triangle in Forex: FAQs
-
Is the Ascending Triangle Bullish?
Ascending triangles are a bullish formation, meaning buyers are driving up prices while sellers are leaving the market.
-
How Reliable are Ascending Triangles?
Ascending triangles are most reliable during uptrends in the market.
-
Is the Descending Triangle Bearish?
Descending triangles are a bearish formation, meaning buyers are leaving the market.
-
What Does a Symmetrical Triangle Mean?
A symmetrical triangle indicates a price pattern where a breakout is likely, but it is unclear whether the price will breakout on the upside or downside.
Get Started with a Forex Broker
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82 (in US)
71
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All reviews, research, news and assessments of any kind on The Tokenist are compiled using a strict editorial review process by our editorial team. Neither our writers nor our editors receive direct compensation of any kind to publish information on tokenist.com. Our company, Tokenist Media LLC, is community supported and may receive a small commission when you purchase products or services through links on our website. Click here for a full list of our partners and an in-depth explanation on how we get paid.
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