ascending triangle pattern

We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. Technical tools are meant to help make predictions about future trends based on past performance. But remember that the market can be very unpredictable and can swing in any direction at any time. Placing an entry order above the top of the triangle and going for a target as high as the height of the formation would’ve yielded nice profits. After the upside breakout, it proceeded to surge higher, by around the same vertical distance as the height of the triangle.

ascending triangle pattern

The ascending triangle has a flat upper boundary, while the descending triangle has lower highs. As for the bottom line, the ascending triangle has a slope of higher lows, and at the same time, the bottom line of the descending pattern lies horizontally. The profit target for an ascending triangle breakout is typically equal to the price difference at the widest part of the triangle.

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In contrast, in the formation of an ascending triangle, volumes are minimal and can only increase when the upper resistance is broken. The triangle pattern is considered to be a continuation chart pattern which means that the prior trend will continue after the formation of this chart pattern. Consider setting a stop loss slightly below the horizontal resistance line when trading an ascending triangle breakout. This leaves room for the stock to test the horizontal band as new support, but protects you from larger losses in case the breakout fails.

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The illustration below shows the distance from A to B can be transferred higher up, from C to D, in order to project a possible take profit level. Target is usually set for 70% to 100% of the depth of rectangle from trade entry. Stop-loss orders can be placed above the high of the flag for a short trade. Stop-loss orders can be placed above the higher trend line or at the major swing high. Measure the depth between the top trend line and lowest of the upward slope trend line.

What does an ascending triangle indicate?

These lows form an ascending trendline that may be tested repeatedly as the pattern progresses. Named because they look like triangles, these patterns connect the beginning of the upper trendline to the beginning of the lower come. The upper line connects the highs while the lower line connects the lows in that security. Bulls (or buyers) are then capable of pushing security prices past the resistance level indicated by the flat top line of the triangle. If the flat resistance line is broken, the ascending triangle pattern can signal an upcoming trend reversal. In this case, we can expect a change in the trend, from bearish to bullish.

In this guide, we’ll highlight what traders need to know about head and... Breakout trading is one of the most popular trading techniques that enables traders to use technical indicators and charting patterns. In essence, this trading method involves entering a position when the price moves out of a defined range. Buyers eventually lose patience and rush into the security above the resistance price, which triggers more buying as the uptrend resumes.

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A horizontal lower trend line and a descending upper trend line define the descending triangle. On the highs and lows of the ascending triangle, respectively, there is a horizontal trend line. It forms when the market experiences lower highs, thus moving the resistance line down.

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These patterns can be used by traders to pinpoint probable entry and exit locations for lucrative transactions. The expected price movement of the breakout is equal to the price difference at the widest part of the ascending triangle pattern. You can measure the distance between the resistance area and the lowest low at the start of the pattern and add that to the resistance area to calculate a profit target for the trade. Based on its name, it should come as no surprise that a descending triangle pattern is the exact opposite of the pattern we’ve just discussed. This triangle pattern offers traders a bearish signal, indicating that the price will continue to lower as the pattern completes itself. Again, two trendlines form the pattern, but in this case, the supporting bottom line is flat, while the top resistance line slopes downward.

Formation of Ascending and Descending Triangle Pattern

Spreads, Straddles, and other multiple-leg option orders placed online will incur $0.65 fees per contract on each leg. Using stop-losses on the opposite side of the trend is another tool traders can use to reduce risk in a potential ascending triangle breakout or breakdown scenario. In other words, traders can exit their positions at a smaller loss should the trend reverse before reaching its technical profit target.

  • I remember how I would read a book on a specific chart pattern and then when I would go in the market, I could never find an exact match.
  • The target in a bull trend is measured by taking the maximum distance between the triangle’s upper and lower trendline, then adding the distance to the upper trendline.
  • If the triangle pattern is inside of a big trading range, then the solid resistance level might not be that significant.
  • Both patterns are considered continuation patterns and are formed by a series of higher lows or lower highs, respectively.
  • Some leeway on the bottom would be recommended amid the imperfect pattern in practice.

This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion.

Example scanner based on Ascending and Descending Triangles

We have a couple of the most effective strategies for you to trade the ascending triangle successfully. takes no responsibility for loss incurred as a result of the content provided inside our Trading Room. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

If you're going to use triangle patterns, make sure you take positions only after you confirm a breakout in the price action of the security in question. Traders and market analysts commonly view symmetrical triangles as consolidation patterns which may forecast either the continuation of the existing trend or a trend reversal. This triangle pattern is formed as gradually ascending support lines and descending resistance lines meet up as a security’s trading range becomes increasingly smaller. Essentially, the ascending triangle is telling of the building up of bullish momentum for the continuation of an ongoing uptrend.

ascending triangle pattern

No testimonial should be considered as a guarantee of future performance or success. Every investment and trading move involves risk, and readers should conduct their own research when making a decision. In this case, we would set an entry order above the resistance line and below the slope of the higher lows. In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows.

Is the ascending triangle chart pattern bullish or bearish?

When the ascending triangle develops within a trend then we’re going to be interested in buying the breakout. Let’s see a short study of when the ascending triangle happens during a bearish trend. Once you see the pattern setting up, you can wait for a touch of the uptrend line and then place a long entry. The other key piece is the clear resistance level with a series of highs occurring at or near the same price. [1] You don’t want to have one or two peaks, this my friend is just a swing high or double top.