The Triangle Candlestick is a continuation pattern. It forms when price moves into a tighter range depicting combat between the bulls and the bears.
What is the Triangle Candlestick Pattern?
The Triangle acts as a Horizontal Trading Pattern. It shows wide points at the initial stages, and as the price continues to move, the trading range becomes narrow, forming a triangle.
There are three types of Triangle Pattern; ascending, descending, symmetrical.
The Ascending Triangle is a breakout pattern that appears when the price surpasses the resistance level. The resistance level is a horizontal line, forming a slope of higher lows. The triangle shows that the buyers are starting to gain momentum, but are pushing the price beyond the resistance level, developing a breakout.
The Ascending Triangle is bullish in nature and surfaces in an uptrend.
The Descending Triangle is a breakdown pattern that forms when the price falls behind the support level. The support line is horizontal, presenting lower highs. The triangle identifies that the sellers are gaining ground against the buyers.
The Descending Triangle is a bearish pattern and develops in a downtrend.
The Symmetrical Triangle is a combination of higher lows and lower highs. The triangle signifies that neither the buyers nor the sellers are driving the price.
The Symmetrical Triangle is a continuation break pattern and emerges in an uptrend/downtrend.
How to use the Triangle Candlestick Pattern?
Traders use all forms of the Triangle Candlestick Pattern to mark possible entry or exit signals.
Traders may look to go long after the appearance of the Ascending Triangle. The buyers look for the pattern in an uptrend and wait for some time to confirm the trend continuation. An aggressive trader may initiate the trade right after the formation of the Ascending Triangle.
Technical Analysts say that the Ascending Triangle can take a month to establish and can continue for 90 days. For this reason, traders may choose to go long once the price breaches the resistance level.
Conversely, the Descending Triangle determines a bearish signal. After its establishment, traders apply the Descending Triangle to go short. It usually takes the same amount of time to occur as the Ascending Triangle according to analysts.
The Symmetrical Triangle defines a period of uncertainty. Traders don’t know whether to go long or short. However, traders can predict the direction of the trend when the breakout happens. For example, if the breakout takes place at the resistance level, there is a chance that the price will continue to go upwards.
A key thing to consider when trading Triangle Patterns is the volume as it plays an essential role in the breakout to upside or downside. You can use the volume indicator to measure current market volume.
Traders should also look for the head-fake. It is a situation when the price moves in one direction but suddenly reverses.
Triangle Candlestick Pattern trading strategy
The Triangle Patterns seldom turn up on the charts. But when they do, they can be used as part of a forex trading strategy.
Analysts recommend navigating the pattern on higher timeframes and hold the positions for a long time.
You can spot Triangle Candlestick Patterns on long and short term timeframes. They can appear on forex currency pairs, stocks, indices, cryptocurrencies, commodities, metals, energies, gold, silver and more.
Triangle Candlestick Pattern buy strategy
- Look for the Ascending Triangle in an uptrend.
- Wait for the price bar to go bullish.
- Enter the trade after the breakout at the resistance level.
- Set a stop-loss near the recent low of the triangle.
- Exit the trade on a high.
Triangle Candlestick Pattern sell strategy
- Locate the Descending Triangle in a downtrend.
- Wait for the price bar to go bearish.
- Enter the trade after the breakout at the support level.
- Set a stop-loss near the recent high of the triangle.
- Exit the trade on a low.
Triangle Candlestick Pattern conclusion
The Triangle Candlestick Pattern hints continuation of the trend. Traders may wish to wait for confirmation of the trend because sometimes a head-fake could cause distractions.
The Triangle Candlestick Pattern can be used on your trading platform charts to help filter potential trading signals as part of an overall forex trading strategy.
I would prefer to use the majority of candlestick patterns such as the Triangle Candlestick Pattern on the 1-hour charts and above. I tend to find that these charts contain less market noise than the lower time frames and thus give more reliable signals for my forex trading strategies. This also means that I spend less time staring at charts and can also set alert notifications to let me know when price has reached certain levels, candlestick pattern has been formed or a particular indicator value has been reached.
The Triangle Candlestick Pattern is just one method of market analysis amongst thousands. I would not build a trading system alone, but rather combine with other technical indicators such as moving averages, Parabolic SAR, Stochastic Oscillator, RSI, ADX and price action analysis.
Of course, every trading system will generate false signals which is why money management is so important. I would personally be implementing sensible money management and only take traders that give me a favorable risk to reward ratio, ideally of at least 1:3. This means that one losing trade does not wipe out consecutive winners.
The methods of implementing the Triangle Candlestick Pattern into a trading strategy that are outlined within this article are just ideas. I would always ensure that I have good money management, trading discipline and a trading plan when using any forex strategy.
Furthermore, I would combine multiple technical analysis, fundamental analysis, price action analysis and sentiment analysis to filter all entries. You should trade forex in a way that suits your own individual style, needs and goals.
If you would like to practice trading with the Triangle Candlestick Pattern, you can open an account with a forex broker and download a trading platform. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.