Like all other technical analysis patterns, a triangle is a repetitive pattern generating buy and sell signals. Its name is taken from its shape that represents a triangle. Unlike most patterns that only have an ascending and a descending type, the triangle pattern has an additional type called “symmetrical”. Stay with us up to the end of this article to find out what a triangle pattern is, what signals it can generate, and what functions its different types have.
What is a triangle pattern?
A triangle pattern is a technical analysis pattern with a shape similar to a triangle. It is much like the wedge pattern, but with the difference that its support and resistance lines finally meet at the apex on the right side. Triangle patterns are usually considered “trend continuation patterns”, meaning that they signal the continuation of the existing trend. By the way, if they are failed, they may signal a strong trend reversal.
So, we figured out that a triangle pattern consists of a support and a resistance line. The price fluctuates between these two lines. When the triangle begins to shape, it is at its widest condition. With the passage of time, the two lines get closer to each other, and they finally meet. This is when the pattern is completely formed.
Ascending, descending, and symmetrical triangles are distinguished by their shapes. We will go through each of these types independently in the following sections.
An ascending triangle forms when the resistance line is a straight line, and the support line reaches it with a positive slope. The overall shape of an ascending triangle is as follows:
This pattern is also called a right-angle triangle. As we previously mentioned, a triangle is a trend continuation pattern. So, an ascending triangle usually signals that the bullish trend will continue. However, pay attention that a trend MUST exist so that we can infer it will continue. In general, ascending and descending triangle patterns are only practical in trending markets, not in volatile ones.
A descending triangle is exactly the opposite point of the ascending one. Its resistance line has a negative slope, while its support line is straight. The overall shape of a descending triangle is as follows:
Descending triangles are found in bearish markets, and they signal the continuation of the bearish trend.
Symmetrical triangles are completely different from ascending and descending ones. As their name suggests, they look like a symmetrical triangle. They consist of two converging lines that get closer to each other while the range narrows down. You can see the overall shape of a symmetrical triangle in the following image:
Unlike the previous ones, this pattern is used in volatile markets. When a symmetrical triangle forms, it signals that the volatile market has come to an end, and a trend is going to start. However, finding out whether this trend is going to be a bullish or a bearish one is challenging. It is generally said that the market will go back to the trend it had before the volatility had started. For example, if the market was bullish and it then started to range, a symmetrical triangle may signal the rebeginning of a bullish trend, and vice versa.
We tried to explain the concept behind triangle patterns in simple words. Now you know that ascending and descending triangles are useful in trending markets, and symmetrical triangles are useful for ranging ones. An ascending triangle signals the continuation of a bullish market, a descending triangle signals the continuation of a bearish market, and a symmetrical triangle signals the beginning of a trend. However, the ability to put all these into practice is what you acquire only through experience. Have you ever used triangle patterns in your trades? Have you found them useful? Share your opinions with us.