In trading, there are various analytical tools that can be used. One of them is the triangle pattern which is very often used by traders in analyzing the market. This pattern can help you in trading for stock instruments, forex, crypto, and others. For that, this time we will learn how to explain the triangle pattern.

Triangle Pattern is a pattern that will form a trend line at the top and bottom which will later meet on the right side so that it will form a triangle pattern. For more information about this triangle pattern, let's learn about it through the terms below. But before learning it, you can download the GICTrade application so that you can practice this triangle pattern in real-time cases.

What is Triangle Pattern?

This chart pattern is actually a term for a pattern or shape that has been produced by the movement of the price chart. As previously mentioned, the Triangle Pattern is a pattern that will form a trend line at the top and bottom which will later meet on the right side to form a triangle pattern. The triangle pattern is one of the chart patterns that is often used by crypto traders to help understand market conditions and also predict whether the price trend will continue, remain the same, or reverse direction.

These chart patterns will appear quite often in a financial instrument chart. This triangle pattern has been included in the category of continuous patterns. This triangle pattern can be described as a horizontal trading pattern. At the beginning of its formation, this triangle is in the widest position. Then the trading range will narrow because the market is moving sideways, and that's where the points that will form a triangle are formed.
In the chart, the bottom line of the triangle will represent support, while the top line of the triangle will represent an overbought side of the market, where investors will later withdraw profits. The triangle pattern in the forex market will form when the consolidation pattern (price is flat) in the middle of a trend and usually this will indicate a continuation of the existing trend pattern.
 
For example, one of the markets is experiencing a bearish trend (down), then at a certain moment the market will form a consolidation or sideways area. This condition usually takes a long time or there are also those that are short, then the trend (bearish) will eventually continue after exiting the sideways area. That moment is when the triangle pattern theory is usually used by some traders to get profit opportunities. There are two lines in the triangle pattern, namely:
  1. Upper Trendline. This upper trendline is formed by connecting several points at the highest price, which is the supply line by representing the overbought market condition.
  2. Lower Trendline. Meanwhile, there is a lower trendline that will be drawn by connecting several points at the lowest price, which is the demand line to represent price support on the asset.

Before continuing to discuss the types of triangle patterns below, please take the time to fill out an internal survey so that GIC can continue to improve the quality and quantity of existing performance.

Triangle Pattern Types

This Triangle Pattern will be formed by going through two trend lines that have come together at one point. There are three types of triangle patterns that you need to know, namely ascending triangle, descending triangle, and also symmetrical triangle. The following is an explanation of the three types of triangle patterns.

Ascending Triangle

This ascending triangle pattern will indicate a bullish prospect. How to read this type of triangle pattern will be very easy. The top trendline will depict the overhead resistance level which will be relatively flat. While the bottom trendline will indicate the upward direction of the market, with the support level increasing as the trend continues.

The price movement is limited to a smaller range, but bullish sentiment will continue to dominate the overall market trend. Therefore, this ascending triangle pattern is generally considered a reliable indicator to enter a long position. There are several components that are commonly used to recognize this Ascending Triangle, namely:

Flat Upper Trendline

The upper trendline will act as resistance. At this point, price will often approach this level and will bounce until a breakout event occurs.

Ascending Lower Trendline

When the market is consolidating, an upward trendline can be drawn by connecting it at the lows. The upward trendline will indicate that buyers will slowly push the price up – which will provide further support for the bullish trading bias.

Descending Triangle

This descending triangle will describe the market trend that will be opposite, namely a bearish movement. The lower trend line will show the support level at a flat price, while the upper line will show lower resistance when the pattern is played. This price volatility will narrow because the bearish sentiment has begun to dominate the market. Therefore, the descending triangle pattern will indicate that traders can enter with a short position to take advantage of a further downward movement.

Descending Upper Trendling

When the market is consolidating, a downward sloping trendline can be drawn by connecting the highs. This downward sloping trendline would indicate that sellers are slowly pulling prices down – which could provide further support for a bearish trading bias.

Flat Lower Trendline

This lower trendline will act as support. Price will often approach this level and will bounce until a breakout event occurs.

Symmetrical Triangle

While ascending and descending triangle patterns have shown a fairly clear upward or downward market movement, the symmetrical triangle will generally indicate market indecision. This pattern will be characterized by two converging trendlines indicating a trading range that will narrow with support and resistance moving closer together.

When the market becomes hesitant, this symmetrical triangle will later indicate the potential for a breakout. In forming a symmetrical triangle pattern, it is important for you to understand that lower highs (LH) which will be followed by higher lows (HL) will make the price narrower. The series of lower highs on the chart will later explain that buying traders will not be able to raise the price to be higher, which then reflects a lower buying interest.

While HL will illustrate that there is not too much selling pressure, meaning that selling traders cannot suppress a price. A buyer trader who cannot succeed in raising a price and a seller trader who cannot suppress the price to be lower, will result in a price consolidation which is a picture of doubt between traders. If in the future you will find this symmetrical pattern in the market movement chart. It is better to wait to see which direction the movement of the chart is, before you can really decide to start opening a position.

Descending Upper Trendline

At least two reaction highs are required to form a descending upper trendline. These reaction highs must be successively lower and there must be a gap between the highs. If a newer reaction high is equal to or greater than the previous reaction high, then the descending upper trendline is invalid.

Ascending Lower Trendline

At least two reaction lows are required to form a lower uptrend line. These reaction lows must be successively higher, and there must be some distance between the lows. If the newer reaction low is equal to or less than the previous reaction low, then the ascending triangle is invalid.

Triangle Pattern Function

Asset market chart observer and day trader, Cory Mitchell has explained that the triangle pattern is one of the common patterns that day traders should pay attention to. This pattern will help traders identify current market conditions and can be an indicator of trends that may occur in the future. Cory has added that one of the functions of the triangle pattern is to indicate a level of decreasing volatility and provide an overview of trading opportunities.

By understanding and mastering the triangle pattern, traders will be able to develop strategies and also anticipate changes in trends in daily trading, determine a trading position, and also minimize the risk of loss. After knowing the function of the triangle pattern, you can tell your friends about the triangle pattern itself. In addition, you can also invite friends to join GIC and get additional income. You can also become an IB and get other bonuses!

How to Use Triangle Pattern

This triangle pattern has a significant influence in helping traders to make decisions. By using the "Triangle Anticipation Strategy", most traders will get information about the breakout that has occurred at the end of the trend line by forming a triangle pattern. These traders believe that this pattern can later survive and will predict where the breakout is headed. 
You can take an example of a trader who sees an ascending triangle formation, which generally indicates an upcoming bullish breakout. Next, traders will place orders near the triangle support line. By placing orders at that level, traders will have more potential to gain more profit compared to having to wait for a bullish breakout trend.
 
When using this strategy, traders must have sufficient price data and also ensure the triangle pattern that is visible on the market movement chart. In short, the price of an asset in the market must touch the resistance level (for an ascending triangle) or support level (for a descending triangle) at least twice, and entry can only be done at or after the third touchpoint. Here are some tips that you can apply when using the Triangle Pattern. These tips are:
  1. Determine the triangle pattern in a market that is clearly experiencing a bearish or bullish trend, then wait for the consolidation event to occur. There is no need to force the triangle pattern in the sideway area unless you are already proficient and careful in seeing various patterns.
  2. Determine the triangle pattern in one of the time frames that you like. If you are a short-term trader/scalper, then look for the pattern in the M15, M30, or H1 time frame. If you are a long-term trader, then look for the pattern in the H1, H4 or Daily time frame.
  3. Always use wise lot management, adjusted to a balance and leverage of your account when you are about to execute. Make sure the stop loss area and also take profit are adjusted as wisely as possible from the existing candle pattern data, not according to personal desires.
  4. For beginner traders, you can often look at the chart to be able to distinguish between symmetrical, ascending, descending, or non-triangle patterns.

How to Use Triangle Pattern for Crypto Trading

Based on the three types of triangle patterns discussed above, there are several ways to use the triangle pattern suggested by experts. These methods are:

Open Position Using Ascending Triangle Pattern

Analysts from the official Investopedia website recommend traders to open trading positions and purchase assets if the price in the market has successfully penetrated the upper line of the ascending triangle pattern trend and is also accompanied by an increase in transaction volume.

Stop Loss Using Symmetrical Triangle Pattern

Meanwhile, if a symmetrical triangle pattern is found on an asset price chart, analysts from Investopedia advise traders to open the right trading position when a breakout occurs. Trading expert Cory Mitchell also added that traders can place a stop loss point below the low price line when buying an asset or above the high price line when selling it.

Sell ​​Assets Using Descending Triangle Pattern

The team from the Corporate Finance Institute has said that traders should sell assets upon a breakdown of the descending triangle pattern and place a stop loss slightly above the highest price reached during the formation of the triangle.

Risks of Using Triangle Pattern

Although this triangle pattern is considered as one of the technical indicators that has an influence and is quite reliable in predicting the future trend of a market. However, this pattern cannot offer strong certainty about market movements. Therefore, it is important to be able to use strong risk management practices to ensure that you do not experience losses. In addition, if you later use any type of triangle pattern to predict market trends.

You should also make sure that the existing breakout indicator is not a false signal. You can check whether there is enough volume, to later be able to show whether the trend in a market will continue or not. Price movements based on low volume levels will be a sign that it is not good enough for you to enter the trade at that time.

Things to Keep in Mind When Using Triangle Pattern

  • Always be alert for a trend direction before a period of consolidation.
  • Take advantage of the upper and lower trendlines to help identify which triangle pattern is currently forming.
  • Use measurement techniques to be able to estimate the appropriate target level.
  • Adhere to good risk management practices to reduce the risk of false breakouts and ensure a positive risk to reward ratio is maintained on all trades.
After learning a few things about triangle patterns, you can also learn them through books or by going directly to case examples on the internet. If you already know it, hone your skills through the Preliminary Test and measure your trading skills! In addition, also apply various things such as how to use, tips, and things to remember in using the triangle pattern that have been explained above. If you still have questions about triangle patterns, you can fill out the Trader Assessment to consult about the trading you do with GIC.