How to trade breakouts using triangles

Another way to spot and trade forex breakouts on the market chart is to use triangles.

Triangle patterns form during price consolidation phases due to indecision among traders.

The buyers and sellers are in a terrible fist about who takes the lead. The winner of the battle gives direction in the market.

A break on either side of the triangle gives a confirmation signal for either the continuation or reversal of trend.

How to trade breakouts on different types of triangles

You treat triangle breakouts the same way as we do for trend lines and channels.

 Wait for the breakout confirmation after the completion of the triangle.

Common triangles on the market chart.

1. Ascending triangles
2. Descending triangles
3. Symmetrical triangles.

Ascending triangles

 It has a flat resistance at the top and higher lows at the bottom.

This  shows that the buyers are still stronger in the fight than the sellers.

Since there is a lot of bullish pressure, we always expect a break out at the resistance.

However,  price can still break out on the lower support of the triangle. When this happens, it is always followed by a probable trend reversal.

Ascending triangles have a bullish bias but it is always very important to wait for confirmation of candle breakout before entry.

Let us look at example below on Gold Daily Chart

 From the chart above,

The shaded region is the ascending triangle.

The Break and close of bullish candle above the resistance is confirmation for buy entry.

The target is the height of the triangle as shown above.

Descending triangles

This is the opposite of the ascending triangle.

A descending triangle has a flat support at the bottom of the triangle and lower highs on top.

This shows strength on the side of the sellers/ bears.

A descending triangle forms lower highs as it maintains its lows. This indicates more selling pressure in the market than the buying pressure.

A break out is more expected on the support level signaling a continuation in trend when in a downtrend.

Descending triangles have a bearish bias but it is always very important to wait for confirmation of candle breakout before entry.

Let’s take a look at an example on the chart below on Gold Daily Chart.

From our Gold Daily chart above,

The shaded region is the descending triangle.

Break and close of bearish candle below the support is confirmation for sell entry.

The target is the height of the triangle as shown above.

Symmetrical triangles.

As price ranges up and down, it leaves the lower highs and higher lows hence forms an apex at the converging of the two lines of support and resistance.

In this case both the bulls/buyers and bears/sellers almost have equal strength.

Symmetrical triangles usually have NO bullish or bearish bias. A break outs can occur in any direction.

When price breakout at the resistance trend line, it gives a buy signal and a sell signal at the support trend line.

Let’s have examples on how trade forex breakouts using triangles (symmetrical) below.

Example 1

Below is GBPCHF, 4-Hour chart with a symmetrical triangle pattern break out;

The break and close of bullish candle above the resistance trend line confirms the buy signal.

Target is same as the height of the symmetrical triangle as shown above.

Example 2

Below is CADJPY, Daily chart with a symmetrical triangle

 Break and close of the bearish candle below the support trend line is confirmation for the sell signal.

The target is the height of the triangle as shown above.