Ascending Triangle Pattern: What it is and How to Trade it

ascending triangle pattern

Demand and Supply theory is the perfect solution for technical analysts. It’s important to consider market conditions, overall trends, and other factors that may impact the price movement. To find an ascending triangle pattern, look for a stock that had a strong uptrend and is now trading sideways. A horizontal area of resistance should be clearly visible in the chart, while drawing trendline across the stock’s lows should yield an ascending line. Wait for a significant candlestick close above the resistance level to validate the pattern. You want to have the patience to wait for clear signals and avoid impulsive decisions.

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The narrower the wedge gets, the stronger the breakout usually is. The descending triangle is recognized primarily in downtrends and is often thought of as a bearish signal. As you can see in the above image, the descending triangle pattern is the upside-down image of the ascending triangle pattern. The two lows on the above chart form the lower flat line of the triangle and, again, have to be only close in price action rather than exactly the same.

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The profit target for the setup is the distance of the triangle added to the top. The potential issue with this approach is you are exposed to more risk as you are buying at higher levels with greater downside exposure. I like to wait for a key pivot point resistance level to be breached and then place a buy order slightly above this level.

Ascending Triangle Pattern – Chart Examples and Guiding Principles

For the ascending triangle,traders can measure the distance from the start of the pattern, at the lowest point of the rising trendline to the flat support line. That same distance can be transposed later on, starting from the breakout point and ending at the potential take profit level. 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. Traders should watch for a volume spike and at least two closes beyond the trendline to confirm the break is valid and not a head fake. Symmetrical triangles tend to be continuation break patterns, which means they tend to break in the direction of the initial move before the triangle forms.

The key point is you want to see buyers participate in the move to increase the likelihood of follow-through. The next thing you want to see in a breakout is for volume to accelerate on the move higher. This does not mean the volume on the breakout has to be the highest over the last 20 hours or something. The Bullish Bears team focuses on keeping things as simple as possible in our online trading courses and chat rooms.

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Ascending triangles typically form after a strong uptrend, not after sideways price action. Place a stop loss just below the ascending trendline to limit potential losses if the breakout fails. As for profit targets, consider using the measured move method by measuring the height of the triangle’s vertical side and adding it to the breakout point. Don’t risk more than you can afford to lose and determine an appropriate position size to establish based on your risk tolerance and the size of your trading account. The target for an ascending triangle breakout is close to the equal price difference of the widest part of the triangle area. Then add the difference between the resistance area and low to the resistance level at the breakout.

This breakout is oftentimes accompanied by high volume as well to affirm the on-going trend. The ascending triangle is a bullish continuation pattern and is characterized by a rising lower trendline and a flat upper trendline that acts as support. This pattern indicates that buyers are more aggressive than sellers as price continues to make higher lows. The pattern completes itself when price breaks out of the triangle in the direction of the overall trend. Technical analysis requires a great deal of practice and patience.

  1. No, ascending triangles are inherently bullish chart patterns that suggest a potential continuation of an uptrend.
  2. Stock moving averages can be calculated across a wide range of intervals, making them applicable to both long and short-term investment strategies.
  3. In the event of a breakdown, the target is the size of the candle added to the breaking point.

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. The first key component of the formation is a series of higher lows. Jay and Julie Hawk are the married co-founders of TheFXperts, a provider of financial writing services particularly renowned for its coverage of forex-related topics. While their prolific writing career includes seven books and contributions to numerous financial websites and newswires, much of their recent work was published at Benzinga. Ascending triangles are most effective when they appear within the context of an uptrend.

If you will recall, the symmetrical triangle is a neutral formation that relies on the impending breakout to dictate the direction of the next move. After viewing a strong break above resistance, traders can enter a long position, setting a stop at the recent swing low and take profit target in line with the measuring technique. Ascending triangles tend to be bullish as they indicate the continuation of an upward trend. In some cases, they may also point to the reversal of a downtrend. That’s because they point to the continuation of a downtrend or the reversal of an uptrend.

The setup for this failure is the stock makes a new daily high with strength. Both price and volume action looks great and then the stock begins to stall. Next, notice how the stock breaks down through the uptrend line, only to shoot out the top. 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. Remember, with technical analysis, if you don’t keep it simple, you will begin to see things that aren’t even there on the chart.

They typically signal a continuation of an uptrend or, more rarely, a reversal of a downtrend. I now would like to touch on ascending triangle stock patterns that fail. Now failure is relative depending on how you are trading the setup. An ascending triangle is just that, a triangle that’s on the rise. The pattern is a continuation pattern of a bullish event that is taking a breather as the security attempts to climb higher.

Take the difference between the resistance line and lowest low, and add that to the resistance line at the breakout. To illustrate the application of the ascending triangle pattern to forex trading, consider a hypothetical trade setup as follows. Waiting for confirmation is smart; do not get caught in a fake-out breakout. Be sure to have enough information to make a smart and informed trade. This article will help you understand how to identify and trade the ascending triangle pattern.

ascending triangle pattern

These highs do not have to reach the same price point but should be close to each other. In the study of technical analysis, triangles fall under the category of continuation patterns. There are three different types of triangles, and each should be closely studied. These formations are, in no particular order, the ascending triangle, the descending triangle, and the symmetrical triangle.

One trend line is horizontal, while the other connects different price points as it heads up. An ascending triangle pattern consists of several candlesticks that form a rising bottom and at least two to three peak levels that form a flat top due to horizontal resistance. The rising bottom is formed using trend lines connecting at least two to three higher lows.

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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. Another thing to keep in mind is that a breakout becomes more likely as an ascending triangle progresses. The breakout may also be stronger if the resistance area has been tested numerous times already as the ascending triangle pattern formed. First, price action prior to the formation of an ascending triangle is relevant.

As the stock proceeds further into the triangle pattern over time, volume should also diminish. Ascending triangles indicate a pause or consolidation in price action in a trend. After the initial leg up, the pause is a time for traders to reassess the move by selling or accumulating more shares. Finally, always place a stop loss when trading an ascending triangle pattern. Even a breakout that is accompanied by high volume may fail, either resuming the ascending triangle pattern or initiating a reversal.

For whatever reason, with each new higher low, the bulls become slightly more aggressive. As the bulls persist, they set higher lows in the upward-moving bottom trend line. The bottom trend line needs at least two lows to form the lower trend line. Higher lows are needed because the line is not straight across; it moves at an angle. Sign up now for FREE access to our exclusive trading strategy videos. Explore our Trade Together program for live streams, expert coaching and much more.

From beginners to experts, all traders need to know a wide range of technical terms. During this period of indecision, the highs and the lows seem to come together at the point of the triangle with virtually no significant volume. Now, this does not mean to say the ensuing breakout or breakdown doesn’t deliver on the hype. What I am saying is the development of the pattern feels slow and arduous. FOREX.com, registered with the Commodity Futures Trading Commission (CFTC), lets you trade a wide range of forex markets with low pricing and fast, quality execution on every trade.

Due to the existence of two trend lines, we are in a better position to determine the take profit and stop loss, if the pattern is activated. They can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure. Traders use triangles to highlight when the narrowing of a stock or security’s trading range after a downtrend or uptrend occurs. These two types of triangles are both continuation patterns, except they have a different look.

Unfortunately, they hit a wall, and a flat resistance level forms as they get overpowered by the bears. So, below, we are going to show you two basic but effective strategies to use when you identify the ascending triangle pattern. Therefore, it requires a certain level of experience and judgment to identify the pattern, in particular the upper flat line that acts as a crucial resistance line. The ascending triangle has an inherent measuring technique that can be applied to the pattern to gauge likely take profit targets. Learning new concepts about trading approaches and the stock market is critical to your success as a trader.

The highs around the resistance price form a horizontal line, while the consecutively higher lows form an ascending line. An ascending triangle pattern predicts a bullish breakout above the resistance area, typically around the time when the ascending line of the triangle would intersect the horizontal resistance line. Essentially, the ascending triangle is telling of the building up of bullish momentum for the continuation of an ongoing uptrend.

The ascending triangle, often referred to as the ‘rising triangle’, is one of the top continuation patterns that appears mid-trend. Traders anticipate the market to continue in the direction of the larger trend and develop trading setups accordingly. Technical analysis is a type of trading strategy where traders analyze markets and make predictions about future market movements based on past performance. This trading strategy uses tools and techniques to evaluate historical data, including asset prices and trading volumes, rather than business results. Some of the tools used include charts and graphs, including triangles and candlesticks.