This triangle chart pattern is fairly easy to recognize and assists traders to find entry and exit levels during an ongoing trend. The best way to trade the descending triangle pattern is to enter a selling position after the first candle closes below the support level and use the measuring technique to evaluate the profit target. A stop loss should be placed at the highest level of the last price swing inside the triangle. In general, the symmetrical triangle pattern could be bullish or bearish, depending on the direction of the trend before the triangle formation and the conditions in the market. But in all cases, technical traders use this pattern to join an existing trend following the breakout point.
Still, you don’t need to be a rocket scientist to discover the pattern. Essentially, what you need to do is find a price consolidation during an ongoing trend. Secondly, try to identify the upper resistance line with at least two highs which will help you determine the upper line. In this video, our trading analysts explain how to identify and trade the descending triangle pattern.
These patterns are formed once the trading range of a stock or another security becomes narrow. In other words, different patterns may indicate different price movements. Based on its name, it should come as no surprise that a descending triangle pattern is the exact opposite of the pattern we’ve just discussed. This triangle pattern offers traders a bearish signal, indicating that the price will continue to lower as the pattern completes itself.
What is the Triangle Candlestick Pattern?
Generally, it’s fairly easy to recognize the descending triangle chart pattern. First, the pattern usually happens at the end of a bearish rally when the price consolidates before making another move. With these candlestick patterns price will move higher or lower before forming the reversal candlestick and moving back in the opposite direction.
The lines of the triangle eventually converge, setting the stage for a showdown between upward and downward pressure that could determine which direction the price will move out of the pattern. Experts tend to look for a one-day closing price above the trendline in a bullish pattern and below the trendline in a bearish chart pattern. Remember, look for volume at the breakout and confirm your entry signal with a closing price outside the trendline.
Bullish Pennant Pattern
But when they do, they can be used as part of a forex trading strategy. After its establishment, traders apply the Descending Triangle to go short. It usually takes the same amount of time to occur as the Ascending Triangle according to analysts. Traders use all forms of the Triangle Candlestick Pattern to mark possible entry or exit signals. Hello All,
I have made this video which covers briefly on following points for Auto-Chart-Patterns-Ultimate-Trendoscope
As a pattern narrows, the stop loss becomes smaller since the distance to the breakout point is smaller, yet the profit target is still based on the largest part of the pattern. Traders may look to go long after the appearance of the Ascending Triangle. The buyers look for the pattern in an uptrend and wait for some time to confirm the trend continuation. An aggressive trader may initiate the trade right after the formation of the Ascending Triangle. I wish you to be healthy and reach all your goals in trading and not only! Never give up on this difficult way which we are going to overcome together!
Using the same example, we will now showcase how to trade the ascending triangle. As soon as there is a breakout, which is confirmed with a close above the resistance line, we may consider entering the market on the long side. As with every candlestick pattern, we have two options for the entry – immediately after the breakout candle closes, or waiting for a potential throwback. The black horizontal line reflects our entry position – the breakout H1 candle close.
How Do You Trade the Ascending Triangle Chart Pattern?
Ascending triangles tend to be bullish as they indicate the continuation of an upward trend. That’s because they point to the continuation of a downtrend or the reversal of an uptrend. 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.
The pattern shows a pause in a downtrend, which is often as a result of profit-taking. However, the bears are still in control, and the price would soon resume the down move. We can either dip into the market immediately after the breakout candle closes, or wait for a potential throwback. We see that in this case the throwback – a retest of the broken trend line – never occurred. Hence, the end result proved that we only had a single chance to capitalize on the move lower.
The Difference Between an Ascending Triangle and a Descending Triangle
In this case, a trader will enter a selling position when the price breaks the breakout level (in the chart, confirmed with the 61.8% level). Connecting the start of the upper trendline to the beginning of the lower trendline completes the other two corners to create the triangle. The upper trendline is formed by connecting the highs, while the lower trendline is formed by connecting the lows.
And, like most candlestick patterns, the logic of the ascending triangle pattern is to find a breakout level and enter a position once the price of the asset breaks above or below a certain level. Generally, the ascending triangle pattern is a bullish formation that occurs during an uptrend and assists traders in finding an upside breakout. However, bear in mind that this charting pattern is rarely recognized perfectly and systematically (like the double bottom pattern and the triple bottom pattern, for example). A descending triangle pattern indicates that the previous trend is still in effect. It is a continuation pattern that shows a period of price consolidation during a downward trend and signals traders when to join the trend.
For stop-loss, you’ll be looking to insert an order below the lowest price level of the previous trend. Join thousands of traders who choose a mobile-first broker for trading the markets. The Triangle Candlestick Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall forex trading strategy. For your technical analysis, you need to step up to higher timeframes to get a broad view of the structure of the market and know where your trade setup falls in the overall market structure. In addition, you should keep an eye on the key economic data releases as some of them can render your setup useless.
In this case, the followup is usually a strong move lower as the buyers missed their chance to continue the uptrend. Thus, this is the main strength of the ascending triangle – it helps the uptrend to extend. Due to the existence of two trend lines, we are in a better position to determine the take profit and stop loss, if the pattern is activated. Often a bullish chart pattern, the ascending triangle candle pattern triangle pattern in an uptrend is not only easy to recognize but is also a slam-dunk as an entry or exit signal. It should be noted that a recognized trend should be in place for the triangle to be considered a continuation pattern. In the above image, you can see that an uptrend is in place, and the demand line, or lower trendline, is drawn to touch the base of the rising lows.
The ascending triangle candle pattern is a bullish continuation pattern that signals the existing trend is likely to continue. The opposite version, on the other hand, the descending triangle pattern, is a bearish pattern that signals a downward trend that is expected to continue. The ascending triangle is a bullish chart pattern formed during an uptrend and signals the continuation of the existing trend.
We’ll also highlight where you need to enter a position and at what price level you should place a stop-loss order and a take-profit target. When you identify a continuation pattern on a chart, it suggests that the price of the asset has a greater likelihood of emerging from the pattern in the same direction that it was moving previously. There are several continuation patterns, including the ascending triangle, that technical analysts use as signals that the existing price trend will likely continue. Other examples of continuation patterns include flags, pennants, and rectangles.
- Finally, the take profit target could be located at the 78.6% level or at the lowest level of the previous trend (as happened in the above example).
- Note the position of the stop loss below the lowest point of the pattern and the profit target just below the upper boundary.
- As you can see from the chart example below; price formed a series of bearish flag chart patterns in the strong move lower.
- But in all cases, technical traders use this pattern to join an existing trend following the breakout point.
- Other than that, the two patterns also have different formations – the rising wedge has two symmetrical trend lines while the ascending triangle pattern has a horizontal upper line.
- An example of a reversal trade setup often used with candlesticks is the pin bar or engulfing bar.
To sum up, here are the steps you need to take in order to identify and trade the descending triangle candlestick pattern. Continuation patterns can be a breakout trade where price breaks from a pause or consolidation, or a continuation after a short pause in a move higher or lower. A reversal pattern occurs when price ‘reverses’ its current direction. An example of a reversal trade setup often used with candlesticks is the pin bar or engulfing bar. Whilst using one and two candlestick patterns such as the pin bar reversal are extremely popular for finding trade setups, they are only as good as the area that the trade is being taken from.