Triangles are among the effective patterns to analyze historical trends and predict the future direction of the market. This pattern forms when either of these price actions occurs in the market:
In this lesson, you’ll learn the basics behind the formation of triangle patterns in the forex. Discover the three different triangle types, how they form, and what they tell you about the potential market movement.
Triangles are patterns you form after connecting the lows and highs. When the upper and lower trendlines converse, it indicates price consolidation and signals a potential breakout after the indecision.
The reasons behind the triangular price action are the formation of lower highs and higher lows. It means that the currency pair trades tighter and tighter each time it touches the support and resistance.
During the consolidation, there should be five touches of support and resistance. Either three touches of support and two from resistance or vice versa.
A consolidation could form a perfect or acute triangle.
A perfect triangle has both trendlines that move at the same pace. On the other hand, an acute triangle can have trendlines that descend or ascend towards their perfectly horizontal counterpart.
While it’s often considered a continuation pattern, a triangle formation also entails a potential reversal – especially the symmetrical triangle.
Warning: While chart patterns are valuable tools for technical analysis, they have a tendency to provide a false signal or simply fail to manifest the signal. Always supplement your findings with multi-indicator analysis and ask the community to verify the signal.
There are three types of triangles you may see when you try to chart and spot this pattern- a symmetrical triangle, an ascending triangle, or a descending triangle.
Both ascending and descending triangles provide clear signals.
When the market forms an ascending triangle, it could mean that it will be bullish after the consolidation. On the other hand, a descending triangle indicates a potential bearish trend once the price trades below the lower trendline (support level).
Symmetrical triangles can be tricky because the price could break out on either side of the market.
| Symmetrical | Ascending | Descending | |
| Signal | Breakouts on either way | Bullish breakout | Bearish breakout |
A symmetrical triangle could be a continuation or a reversal pattern.
During the formation of this pattern, the market is making lower lows and lower highs – alternatively.
This is because neither the bulls nor the bears are pushing the price in their preferred direction. They are taking turns in moving the price, but clear trends are not being manifested.
Trading the symmetrical triangle can be tricky because it doesn’t signal the potential market direction once it breaks out.
What you can do is set an entry point either above the resistance level (upper trendline) or below the support level (lower trendline).
Yes, you can place two entry points at the same time – while it would cost you commission or spread, this ensures you can ride the market movement either way.
An ascending triangle could mean that the market will become bullish after the consolidation.
This signal is backed by the increasing strength of the buyers despite the indecision.
During the formation of the ascending triangle, the price will hit higher lows while maintaining a stable high. This forms a perfectly horizontal upper trendline (a clear resistance level) and a lower trendline that slopes upward toward the resistance level.
The higher trendline represents the price level that the buyers have difficulty in exceeding. However, the bulls start to gain strength and boost their momentum – evident in the formation of higher lows.
By gradually pushing the price up, the market will likely trade above the resistance threshold, breaking it and making higher highs.
Once it trades above the higher trendline, it signals a strong bullish movement.
The descending triangle is the counterpart of an ascending pattern. It signals that the market will become bearish after it consolidates within a clear support level and slops higher uptrend.
The string of lows that are at almost the same market level forms the price’s support level. Meanwhile, the lower highs formed one after another make an upper trendline that slopes downward.
The descending upper trendline signifies that the bears are gradually taking over the market, which is evident in the formation of lower highs.
On the other hand, the support level signifies the market level where the sellers are having difficulty pushing the price lower.
Once the bears successfully push the price below the support level, it indicates a strong bearish trend.
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