Chart pattern trading is often considered to be the most advanced form of trading strategy in the forex market. All the professional traders use the chart pattern trading technique in order to catch the large movements of the market. But if you are relatively new in forex trading then it will be extremely difficult for you to trade the different chart pattern in the forex market. But don’t worry! You can still trade one chart pattern with a great level of ease and confidence with the minimum guideline. Triangle chart pattern is often considered to be favorite chart pattern in the novice trader’s community since its extremely easy to spot and highly reliable. Before we go further let’s discuss the different types of the trading chart pattern. Triangle chart pattern is mainly of three types
- Ascending triangle
- Descending triangle
- Symmetric triangle
These three are the most prominent triangle chart pattern in the forex market. Ascending triangle chart pattern is most formed after the long bullish move of certain assets and most of the time the breakout occurs in the upside direction. The descending triangle chart pattern is formed after a long bearish movement of a currency pair and 90 percent of the time the breakout occurs in favor of long-term bearish trend. But when the symmetric triangle chart pattern is a little bit different since it may form in prevailing trend in the market and the direction of the breakout is also unknown.
Let’s see the formation of three type’s triangle chart pattern
Figure: Major types of triangle chart pattern
In the above figure, you can clearly see that the symmetric triangle chart pattern is formed by two symmetric trend lines which slowly bounds the price in the market and the direction of the breakout of this type of chart pattern in not certain. In figure 2 you can see the formation of the ascending triangle chart pattern and most of the time the price breaks the horizontal resistance line of the pattern. The third pattern is the descending type triangle chart pattern and in general, the breakout occurs in the downside direction. Professional traders keenly observe the chart to spot these three types of patterns in the market. Once the find the pattern they wait patiently for the breakout of this pattern to execute their trades in the market with proper risk management factors.
The triangle chart pattern can be traded in two different ways. Depending on your personality and trading style you will choose which type of entry method you will follow in trading these pattern. So the two most popular method of triangle chart patterns in forex trading are
- Aggressive method
- Conservative method
Aggressive method: Those who are aggressive traders execute their trades in the market just after the breaching of the triangle support zone or the resistance zone. This type of trading strategy is a little bit risky but if you have decent experience in candlestick formation then you can easily catch large moves of the market by using this trading strategy. But at times you will be the victim of a false breakout and in that case, make sure that you place your stop loss using the broken support or resistance level of this pattern.
Conservative method: There are many traders in the financial industry who often likes to reduce their risk in every possible way. So the conservative traders wait for the price to retrace back towards to the broken support or resistance level in the market to execute their trades in the market. There is some advanced professional in the financial industry who often use price action confirmation signals in the market to execute their trades while trading the breakout of this pattern.
The validity of the chart pattern: Most of the new traders often draw this pattern in an incorrect way in their trading chart and thus incur losses in the market. So it’s extremely crucial that you know that you chart pattern is valid in the market. The first thing that you should look is the volatility of the market. Most of the time the market tends to seize its volatility in prior to the formation of this chart pattern. And always make sure that price is bounded by an upper resistance level and supported by horizontal support zone. And there should be any breach in the support or resistance level in the chart pattern before the formation of this pattern.
Use higher time frame: Most of the novice traders often get excited with this triangle chart pattern reliability and start trading the smaller time frame in the market. But in order to take the best possible trades in the market make sure that you always draw you triangle chart pattern in the higher time frame. And be aware that most of the time the breakout of this pattern occurs during the event of the high impact news release in the market.
Summary: Chart pattern trading can be extremely profitable if you truly know how to trade them. Always make sure that you execute your trade in favor of the long-term prevailing trend in the market since most of the time the breakout occurs in the direction of the last prevailing trend. Try to master the art of price action trading strategy since it will help you trade the breakout of this pattern in the conservative way with very precise stop loss and entry point. And if the price breaks the support or resistance level of the pattern prior to the completion of this pattern formation than don’t trade that pattern.