Triangles. They go right along the rectangles in our school of trading here. And we are to use them to our advantage as much as we can as they can be really helpful in order to spot a future trend.
So. Triangles, just like in your math class can be of several kinds. In the markets they can be ascending, descending and symmetrical. And I think I will start with symmetrical.
As we can see in the picture, this pattern occurs when the two sides are starting two fight. Yes, yes, just like the Sith and the Jedi, but only in the markets and there are no bad guys. So, it is like Star Wars for people who love forex.
Symmetrical triangle occurs when lower highs meet higher lows. And it is up to one of the parts to break the pattern. But what direction it is going to go? What order are we to put down?
Well, all I can say here is that the price just will break out eventually. There is just no way to say what side will win – the one with the most power, as usual. And we need to know how to act fast. We can place an order in either direction and just pull out fast as soon as we see the chart go in the opposite one. That is the only case of benefiting from it – pure power of the sides.
Now we go onto the descending triangle.
This one occurs when the highs are going lower and getting together with the support level. And support level is standing strong and doesn’t break… for some time. But just like a very flimsy chair under a fat cat, it is going to break sooner or later. And more often the price is going to go on with the downtrend.
Although the growth of the price is not excluded here as well. It is just not as common as the going lower thing.
Ascending triangle is just like its descending brother, only vice versa.
Here the lows are getting higher and catch up with the resistance level. Ascending triangles are the perfect indicators for spotting the continuing uptrend.
Although here it is the same question – will the buyers be stronger, because it is, again, possible for the uptrend to stop right at the peak of the triangle, although usually that doesn’t happen, so placing the right order here can help you catch some pips.
With triangles I should say that wherever the graph goes, its height usually equals the height of the base of the triangle. That is going to help you understand the basic size of the movement.