Using Triangles, Stack Them Together to Make Profit

Triangles: Simple, easy to use and profitable

Triangles provide one of the most useful – and easy to execute –  price pattern formations. An established triangle pattern – also referred to as a wedge or pennant – is a valuable signal prior to a relatively predictable price change. The odds favor a strong directional move from a breakout of a triangle pattern, especially in a continuation breakout of the prevailing trend. Continuation patterns indicate that the temporary pause in directional price movements is just that – only a temporary pause.

An Overview

• When the top and bottom trendlines form a triangle a valuable indicator is formed, often forecasting a sharp subsequent movement when the price breaks out. The wider the price fluctuations within the triangle, and the longer the triangle pattern holds, the greater the following price change.


• Good triangles are an intermediate pattern, taking from one to three months to form.

There are four different types of triangles:

• 1. symmetrical


• 2. ascending


• 3. descending


• 4. expanding

Symmetrical triangles consists of two converging trend lines (upper line goes lower and lower line goes higher). The point at which they cross is called top. Note the classic triangle formation on the daily chart of the USD/JPY pair below.  

There must be at least four reversal points in order for a triangle to be recognized, but there may be more (for example, six: three peaks and three troughs).

 In most cases the breakout occurs in the middle to three-quarters of the triangle width. If within three-quarters of the triangle width the breakout has not occurred, the subsequent price action will be weak and difficut to predict. The fewer price fluctuations inside the triangle, the more chances that trading volume will decrease (this is a common rule for most continuation patterns).

The formation ends when a trendline is broken. It is sometimes followed by a pull back to the trend line (if it was an upside breakout then it would be support level if downside breakout it would be the resistance level. The top of the triangle will be the important support/resistance level. To estimate if the triangle line breakout is true, please refer to the methods previously used to test trend-line breakouts.

Ascending triangle is a type of symmetrical triangle:

Its upper trend line is horizontal whereas the lower one is upward sloping. This is a bullish formation as in this scenario buyers are more active than sellers. When an ascending triangle develops, it is usually a good chance for an upside breakout to occur.

Ascending triangles are usually formed as a continuation pattern in an uptrend, but sometimes they can be found at the bottom of a downtrend, signaling a reversal. Even if the market is bearish this chart pattern should be considered as bullish.

 Descending triangle is a bearish formation, a mirror image of an ascending triangle: 

How to analyze symmetrical, ascending and descending triangles:

       1. Classic triangle has five lines (three downward and two upward or vice versa).

• 2. If the price penetrates the triangle downwards then the price may continue to fall.


• 3. If the price penetrates the triangle upwards the price may continue to rise.


• 4. If the pattern angle is up-directed the price may move higher.


• 5. If the pattern angle is down-directed the price may move lower.


• 6. If prices remain within the triangle beyond the three-quarter point, the triangle begins to lose its potency, and prices may continue to drift out to the apex and beyond.  


• 7. Triangle top will be the support/resistance level.


• 8. Typically, volume is heavy at the beginning and it contracts during the formation of a triangle. It increases again during the breakout.


• 9. The price continues moving in the direction of the breakout for at least a range equal to the triangle's height.

An expanding triangle (more often appears at highs) consists of three gradually rising highs and two gradually falling bottoms:

About the Author