Technical analysis uses various indicators, candlestick patterns, chart patterns and various tools to predict the future price. Ascending Triangle is a widely used continuation pattern that is easy to spot and trade.
Ascending Triangle definition
Ascending Triangle chart pattern shapes form in an uptrend. Resistance level keeps the price below that level. While at the same time lower price points get higher and higher. Finally price breaches the resistance level and provides entry signals for traders.
Why is understanding the Ascending Triangle important for traders?
- Ascending Triangle offers a great risk and reward ratio.
- The pattern is easy to spot on the charts.
- The pattern is easy to trade.
- Ascending Triangle is a continuation pattern, therefore, it might help you stay in the position longer or close out on time in case the pattern goes against previous predictions.
Thorough Ascending Triangle Explanation
Chart patterns work better in larger time frames. Small time frames have more noise and produce many false trading signals.
The pattern is only considered ready for trading after the resistance level is broken. Many novice traders make that mistake and finish the pattern in their head.
Breaking the resistance level means that the bullish trend has a good chance to be continued. Stop Loss order is usually placed below the resistance level.
Take Profit target can be multiple, as already mentioned the pattern helps the trend continue. And in some markets, bullish trends have the potential to keep rising endlessly. Usually the minimum Take Profit target is as wide as the maximum distance between the Triangle’s support and resistance lines. For instance: the Take Profit target CD equals AB.
Now let’s discuss the shortcomings of the chart pattern. Ascending Triangle works less well for smaller time frames. In addition, the pattern doesn’t take into an account all of the necessary data such as market news and fundamentals. Therefore, it’s better to trade the pattern in context.
Example of Ascending Triangle in Forex
Forex markets are ranging more often than Stock markets. When trading Ascending Triangle patterns, you can use volume indicators to increase your chances of success. Volume usually increases at the breaking point. If there’s not enough volume, the pattern might fail to get completed.
FAQs on Ascending Triangle in Trading
How do you use an ascending triangle?
Ascending Triangle pattern is a bullish, continuation pattern. Therefore, it can only be traded in one direction. Keep in mind that the pattern needs to be fully finished first before it gives you an entry. Whenever price breaks the resistance level up, the pattern is considered ready to be entered.
What does an ascending triangle pattern look like?
Whenever price has higher lows and the resistance level holds the price, the pattern emerges. Price pattern looks like a triangle in an uptrending market condition. Therefore the pattern is called the Ascending Triangle.