DavidWaring

In our last lesson we learned strategies for trading the flag and pennant chart patterns. In this lesson we are going to look at a pattern which is similar in nature to the flag and pennant pattern which is called the triangle pattern.

Triangle Patterns can be broken down into three categories: The ascending triangle, the descending triangle, and the symmetrical triangle. While the shape of the triangle is significant of more importance is the direction that the market moves when it breaks out of the triangle. Lastly, while triangles can sometimes be reversal patterns they are normally seen as continuation patterns.

The Ascending Triangle:

The ascending triangle is formed when the market makes higher lows and the same level highs. These patterns are normally seen in an uptrend and viewed as a continuation pattern as the bulls gain more and more control running up to the top resistance line of the pattern. While you normally will see this pattern form in an uptrend if you do see it in a downtrend it should be paid attention to as it can act as a powerful reversal signal.

Ascending Triangle Example:


The Descending Triangle:

The descending triangle is formed when the market makes lower highs and the same level lows. These patterns are normally seen in a downtrend and viewed as a continuation pattern as the bears gain more and more control running down to the bottom support line of the pattern. While you normally will see this pattern form in a downtrend, if you do see it in an uptrend it should be paid attention to as it can act as a powerful reversal signal.

Descending Triangle Example:


The Symmetrical Triangle:

The symmetrical triangle is formed when the market makes lower highs and higher lows and is commonly associated with directionless markets as the contraction of the market range indicates that neither the bulls nor the bears are in control. If this pattern forms in an uptrend then it is considered a continuation pattern if the market breaks out to the upside and a reversal pattern if the market breaks to the downside. Similarly if the pattern forms in a downtrend it is considered a continuation pattern if the market breaks out to the downside and a reversal pattern if the market breaks to the upside.

Symmetrical Triangle Example:


So that completes this lesson. You should now have a good understanding of the different types of patterns patterns and what each signifies. In our next lesson we are going to go over strategies for trading triangle chart patterns of these patterns complete with entry and exit points so we hope to see you in that lesson.

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!

Links From Around the Web to Help You Learn to Trade Triangles

Ascending Triangles
Descending Triangle - Descending Triangle Pattern
Symmetrical Triangle (Continuation) - StockCharts.com

Unregistered

Hello David,
I would first like to thank you for the informative lessons that you have put together. As some one new to trading I have found your videos very helpful in understanding the art of trading. After watching every one of the videos I proceeded to analyze as many charts as time would allow in order to gain experience in reading charts. On the subject of Ascending Triangle you mention "if you do see it in a downtrend it should be paid attention to as it can act as a powerful reversal signal". Is this what I am seeing developing in LDK's chart in the last 6 days. I am curious to see if this is a reversal in the making. I was hoping to hear your thoughts on this.
Thank you for the great work and any insight on this pattern developing in LDK's chart that you might give.
James Montgomery

David Waring

Hi James,

Thank you for the feed back I am glad you like the videos and feel that you are learning from them.

Regarding LDK in my view yes there is a triangle forming on LDK however I would see it as a symmetrical triangle as when I draw it on my charts it does not seem that the triangle has a slope up or down but points almost directly to the right.


As I talk about in the above video often times when this happens you will see the market break and have a good run in one direction but you don't know which direction the potential breakout is going to come until it breaks the upper or lower resistance triangle lines.

So with that in mind it will be interesting to see if we do get a break and a run here.

Hope that helps. As always please remember that trading can result in significant financial loss and that my analysis is for learning purposes only and should not be considered trading recommendations.

Please let me know if there are any other questions.

Best Regards,
Dave

Unregistered

Dave,
When watching this stock develop through 12/20/07-01/03/08, I was able to see the symmetrical triangle form which was filling the gap. Then as the stock broke this pattern by moving down to form a separate pattern. I was seeing this second pattern as an Ascending Triangle with resistance at about the $26.20 line, which corresponds to the first gap up. The lower angled line is the same as you have show for the symmetrical triangle. As you pointed out there is again a symmetrical triangle that has formed from the two smaller patterns. When two adjacent patterns causes another to form, is there a process to analyze these? Would one have precedence over the other or is it a combined effect? I currently see this as a time line of events and see the current battle having a little more weight than the proceeding one. What are your thought on a situation like this? Any information on this subject that you might be able to give would be greatly appreciated.
James

David Waring

Hi James,

Thanks for the reply. Anytime you have multiple things lining up that is normally going to give more weight to whatever it is that you are reading on the charts. So if I am understanding correctly what you are looking at is the following:


Secondly here, I think most traders would agree that the longer time frames carry more weight than the shorter time frames. In this case however what we have on the longer time frame is a symetrical triangle and as you have pointed out there is an ascending triangle on the shorter timeframe.

With this in mind I think you could say that there is a slight bias for a reversal here but, as with all triangles I think most traders would agree that one needs to wait for the break and have a look at the volume on that break before incorporating that into a potential trading decision.

As always please remember that trading is risky and can result in significant financial loss and that my posts are for educational purposes only and should never be considered trading advice.

Hope that helps. Please let me know if there are any other questions or comments and if anyone else would like to weigh in on this one please feel free to post.

Best Regards,
Dave

Unregistered

David, Thank you for clarifying how this situation is viewed. As a person still learning the trading process, I appreciate the time and patience that you have put forth in answering my questions. Thumbs-up for a great website that has expanded my knowledge of the art in trading.
Sincerely, James Montgomery
P.S. "As always" I "remember that trading can result in significant financial loss and that" your" analysis is for learning purposes only and should not be considered trading recommendations".

David Waring

My pleasure James thank you for contributing the community.

Best Regards,
David

Unregistered

Dave,
First I would like to say, thank you. I’ve been watching your videos for months now. I love them. Thank you.
Quick question, what is the difference between wedges and triangulars? They look identical to me. Thank you very much again.
Yasser

David Waring

Hi,

Thanks for the comment am glad you like the videos and have been keeping up with them for so long.

Wedges and triangles are basically the same thing. The only difference is the symetrical tringle points sideways in general where the rising and falling wedge points upwards or downwards.

Best Regards,
Dave

Unregistered

Thanks Dave for the quick response. I did not expect that.
in regard to the difference between symmetrical triangle vrs wedge, would you say that looking at GBP/JPY , 8 hour chart, for the last 30 days, is that a rising wedge with a potential continuation in the down trend direction, or is it symmetrical triangle with an even potential to go either direction?
What technical indicator I could try here to better clarify the direction?
Thank you Dave.