Technical analysis: triangles

What is a Triangle in Technical Analysis?

A triangle is a continuation or reversal pattern formed on price charts when price action converges in an increasingly narrow range. This pattern reflects a period of hesitation and indecision in the market. Once the pattern has ended, the market tends to exit (or "break") in a specific direction, often accompanied by high volatility.

1. The Symmetrical Triangle

Structure of the Symmetrical Triangle

The symmetrical triangle is formed when :

• The peaks are getting lower and lower.
• The troughs are getting higher and higher.

The two trend lines (upper and lower) converge at a point, creating a triangular shape. This type of triangle does not give a clear directional bias in advance.

Meaning

The symmetrical triangle reflects a balance between buyers and sellers. This means that market forces are temporarily neutralizing each other, waiting for a new impulse to give direction to the price.

Practical example

Let's take the example of a share quoted at 50 $. The price begins to move in a narrow range, forming lower highs at 55 $, 52 $, then 51 $ and higher lows at 45 $, 48 $, then 49 $. Once the price exits the triangle, it can move in an upward or downward direction, depending on the breakout.

How to use it in Trading?

• Entrance : Wait for a break above or below the triangle. A bullish breakout occurs when the price rises above the upper trend line, while a bearish breakout occurs when it falls below the lower trend line.
• Stop-Loss : Place a stop-loss just outside the side opposite the break.
• Take-Profit : Measure the height of the triangle at its widest point and project this distance from the break point.

2. The Ascendant Triangle

Structure of the Ascendant Triangle

The ascending triangle is formed when :

• The upper trend line is horizontalrepresenting resistance.
• The lower trend line is ascendingrepresenting higher and higher troughs.

This triangle reflects increasing buying pressure, which usually ends up in a bullish breakout.

Meaning

An ascending triangle shows buyers gradually taking control, repeatedly testing a key resistance level. A break above this resistance level confirms buyer domination.

Practical example

Let's imagine that the price of Bitcoin oscillates between 30,000 $ and 35,000 $. Successive lows are formed at 30,000 $, 31,000 $, then 33,000 $, creating an ascending line below the price. When the price exceeds 35,000 $, a bullish breakout is confirmed.

How to use it in Trading?

• Entrance : Open a long position as soon as the price breaks above the horizontal resistance line with high volume.
• Stop-Loss : Place a stop-loss just below the last trough formed by the rising line.
• Take-Profit : Calculate the height between the horizontal resistance and the initial trough, then project this distance upwards.

3. The Descending Triangle

Structure of the Descending Triangle

The descending triangle is formed when :

• The lower trend line is horizontalrepresenting a support.
• The upper trend line is descendingrepresenting lower and lower peaks.

This triangle reflects increasing selling pressure, which usually ends up causing a bearish break.

Meaning

A descending triangle shows sellers gradually taking control, repeatedly testing a key support level. If the break occurs below this support, it confirms the sellers' domination.

Practical example

Let's take the EUR/USD as an example. The price oscillates between 1.1200 and 1.1000. Successive highs are formed at 1.1150, 1.1120, then 1.1080, creating a descending line above the price. When the price falls below 1.1000, a bearish breakout is confirmed.

How to use it in Trading?

• Entrance : Open a short position as soon as the price breaks below horizontal support with high volume.
• Stop-Loss : Place a stop-loss just above the last peak formed by the descending line.
• Take-Profit : Calculate the height between the horizontal support and the initial vertex, then project this distance downwards.

Triangles and the Psychology of the Market

These figures reflect the psychology of investors during a period of consolidation. Symmetrical triangles show general hesitation, while ascending and descending triangles show increasing domination by buyers or sellers. Breakouts are often accompanied by an increase in volume, confirming the movement.

Tips for working with triangles

1. Patience: Always wait for confirmation of a break before taking a position. False breaks are common, especially in volatile markets.
2. Volume : A break with high volume is a more reliable signal than a break with low volume.
3. Background : Combine triangles with other technical analysis tools, such as moving averages or indicators like the RSI, to confirm market direction.
4. Risk Management : Use tight stop-losses to minimize losses in the event of an unexpected reversal.

Conclusion

Symmetrical, ascending and descending triangles are powerful tools for identifying periods of consolidation and anticipating directional movements on the financial markets. By understanding their structure, meaning and use, you can dramatically improve your analysis and make more informed trading decisions. Practice spotting these patterns on your charts and test different strategies to master their potential.

We hope this article has helped you better understand triangles in trading. If you have any questions or comments, join us on social networks with the hashtag #xenesy and identify @xenesy_project. Happy trading!