In our last lesson we learned how to spot the three different types of triangles on a chart, the ascending triangle, the descending triangle, and the symmetrical triangle. In this lesson we are going to look at the strategies for trading these patterns complete with entry and exit points.

As we learned in the last lesson, the direction in which the market breaks out of the triangle, and whether the market is in an uptrend or downtrend determines whether the pattern is a continuation or a reversal pattern and therefore whether traders look to go long or short.


As with the other patterns we have recently learned about, when traders spot an ascending triangle, they will look to trade the break of the upper resistance line. The target is then derived by measuring the distance between the starting high point of the ascending triangle with the starting low point of the triangle, which is then projected upward from the breakpoint. The stop is then placed just below the most recent trough of the pattern.

The Ascending Triangle Strategy:


The descending triangle is the mirror image of the ascending triangle and normally seen in downtrends. When traders see this pattern they will look to trade the break of the lower support line. The target is then calculated the same way as with the ascending triangle, by measuring the distance between the high and low points at the start of the pattern and then projecting that distance downward from the break. The stop is then placed just above the nearest peak.

The Desending Triangle Strategy:


The symmetrical triangle can be seen and traded in either up trends, down trends, or sideways markets. When traders find this pattern on a chart they will look to trade in the direction of the breakout, as this is a sign that one direction either the bulls or the bears have won out over the other. Like ascending and descending triangles, traders will look to trade the break of the pattern, calculating their target by measuring the distance between the high and low at the start of the pattern. The stop will then be placed just outside of the nearest peak if the market breaks to the downside or the nearest trough if the market breaks to the upside.

The Symmetrical Triangle Strategy:


For confirmation on all three strategies, traders will look for declining volume as the pattern matures and then increasing volume on the break.

That completes our last lesson in our series on chart patterns. You should now have a good understanding of many of the most common chart patterns as well as common strategies for trading those patterns. In our next lesson we are going to start our series on learning technical indicators by looking how these tools are used in trading and how they can be used to compliment the concepts and strategies we have learned in our chart patterns lessons.

As always if you have any questions or comments please leave them in the comments section below so we can all learn to trade together, and good luck with your trading!

my nickname is yxz353
I want to thank you for these lessons.
Good Luck of all informedtrades.com Crew

Hi yxz353,

Thanks so much for the feedback I am glad you like the lessons.

Best Regards,
David

How many pips below pattern line before we know we have a break?
Tom

Hi Tom,

Great question. There are no hard rules here as this really depends on the time frame that one is trading, what other pieces that you are using are telling you about the market, and a traders personal preference.

Many traders look for a close outside the triangle for the day before considering a beak outside the triangle line a true break and enter the trade on the next day's open. For shorter term traders many traders will wait for price to trade outside of the level they are watching (in this case a beak outside of the triangle) for at least 1 hour before considering it a true break.

Hope that helps and let me know if there are any other questions.

Best Regards,
David

Hello,

Thanks for the videos. I appreciate your work.

So far I will be using BB and RSI with divergence as a set up.

I trade the Eur/Usd on 5, 15, and 30 mintue time frames.

Could you tell me 1 or 2 other very strong set ups that would fit Euro/Usd in these time frames?

I just want to master 2 or 3 of the strongest set ups for this pair and time frame.

I have a short market bias for the next year.

Thanks

David Turnbull

Hi David,

Thanks for the comment am glad you are liking the videos.

I think its important for a trader to really go through a trial and error process of determining which indicators etc are best for them so that their strategy is truly there own and they have the confidence that comes with that. With this in mind I don't like to give specific advice over and above the general guidelines that are outlined in my videos which are meant to lay the groundwork that I feel all traders need to develop their own strategy.

Having said this however as I outline in my videos many traders will watch for chart patterns like the head and shoulders and triangles and candlestick formations in conjunction with indicators which they use to confirm what the chart patterns are telling them.

If there are any other questions or comments on this please feel free to post them below.

Best Regards,
Dave

Dear David,

thank you for your powerful lessons.

Look, I´m wondering if I´ve learned well so far,

please check the jpg attached...

...Was it really a triangle?
...Did I calculate well?

If so the next time I will put a position,

Many thanks again and Best Regards

Ezambrandt

PS: The image is from EasyForex

Attached Thumbnails

 

Hi Ezambrandt,

Thank you for the compliment I am glad you like the lessons. Also thank you for posting the chart this makes it a lot easier for me and others to comment on what you are doing.

Yes I would say that what you have spotted here is a triangle and that you have drawn it correctly as well as mesured the profit target as most traders would.

What other things about this chart would make you want to potentially place a trade in this situation?

Best Regards,
Dave