These are right-angled, triangle-shaped patterns that normally appear in uptrend indicating a small pause in price movement by laying a congestion. An ascending triangle is a bullish continuation pattern showing high swings of prices coming up after the consolidation.
It is formed by a flat resistance and an ascending trend line. Price bounces up and down and makes higher lows as it maintains the highs. This indicates a bullish bias. The break and close of the candle above the resistance line gives a confirmation Buy signal for a continuation in the uptrend.
Let’s look at the illustration below
To trade the ascending triangle breakout, first, you have to identify the pattern and it must be in uptrend. An ascending triangle, like we have seen before has a flat resistance line on the upper side. After you have identified the pattern, wait for a confirmation candle to break and close above the upper side of the pattern.
Enter a buy position immediately on the close of the breaking candlestick above the resistance line. The target is the same as the height of the triangle. The stop-loss is set below the immediate lower level of the pattern.
Let’s take a look at an example below on the EURNZD, Hourly chart;
The EURNZD, Hourly chart above shows an ascending triangle when in uptrend. The confirmation for a Buy signal for continuation is the break and close of the candle above the resistance line as shown.
So the Profit target is got by measuring the height of pattern (H) at formation and projecting that same distance (H) upwards as shown in the chart above. Stop loss is set slightly below the immediate lower level of the pattern.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...
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