Forex Trading

Ascending Triangle Pattern: A Bullish Stock Chart Pattern

ascending triangle pattern

Trading stocks, options, futures and forex involves speculation, and the risk of loss can be substantial. Clients must consider all relevant risk factors, including their own personal financial situation, before trading. Trading foreign exchange on margin carries a high level of risk, as well as its own unique risk factors. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Prior to trading options, you should carefully read Characteristics and Risks of Standardized Options.

The ascending triangle pattern offers a powerful tool for forex traders seeking to trade uptrends profitably. The pattern has a distinctive shape characterized by a flat top resistance line and an upward-sloping support line that can be readily identified. As the ascending triangle name suggests and the above image illustrates, the pattern takes the shape of a triangle.

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With prices reflecting the demand in the market, the had reflected the multiple attempts by the market at breaking above the horizontal resistance level. These attempts get more aggressive with the development of the ascending triangle pattern seeing the shorter candles over time. Eventually, the market will be looking for a breakout for a continuation of the uptrend. This breakout is oftentimes accompanied by high volume as well to affirm the on-going trend.

ascending triangle pattern

Eventually, price breaks through the upside resistance and continues in an uptrend. In many cases, the price is already in an overall uptrend and the ascending triangle pattern is viewed as a consolidation and continuation pattern. In the case of an ascending triangle pattern, the bulls move the price up to the formed horizontal resistance. At this point, the selling pressure increases, and the price begins to turn around. Thus, the lower upward sloping trendline is rising, and each subsequent low is higher than the previous one. Bulls and bears are moving toward each other and meet at the resistance level.

Principle and validity of a good Ascending Triangle

Despite being a continuation, traders should look for breakouts before they make a move to enter or exit a position. Bullish continuation patterns can assume different forms ascending triangle pattern – triangles, flags, pennants etc. The ascending triangle is one of the most common formations in this area, as it practically consists of two converging trend lines.

Therefore, it requires a certain level of experience and judgment to identify the pattern, in particular the upper flat line that acts as a crucial resistance line. In this scenario, the buyers lost the battle and the price proceeded to dive! You can see that the drop was approximately the same distance as the height of the triangle formation. We can place entry orders above the slope of the lower highs and below the slope of the higher lows of the symmetrical triangle.

What is an ascending triangle

It gives you a chance to hone your skills without using your own funds in conditions that mirror market conditions. For instance, imagine the market has formed an ascending triangle for the EUR/USD pair, but the European Central Bank comments that it plans to loosen its monetary policy. Short squeezes can introduce a lot of volatility into stocks and send share prices sharply higher. These squeezes offer opportunities for trading, but they often require different strategies and more caution than traditional breakouts.

ascending triangle pattern

It’s these higher lows that indicate increased buying pressure and give the ascending triangle its bullish bias. In contrast to the symmetrical triangle, an ascending triangle has a definitive bullish bias before the actual breakout. If you will recall, the symmetrical triangle is a neutral formation that relies on the impending breakout to dictate the direction of the next move.

Does an Ascending Triangle Imply a Bullish or Bearish Trend?

Therefore, the best course of action is to trade your trading plan and not get locked into hard numbers or expectations around the pattern. The next thing you want to see in a breakout is for volume to accelerate on the move higher. This does not mean the volume on the breakout has to be the highest over the last 20 hours or something.

  • Since it’s ascending, the bottom horizontal line is tracking new higher lows.
  • Connecting the start of the upper trendline to the beginning of the lower trendline completes the other two corners to create the triangle.
  • Read on if you find the ascending triangle intriguing and want to see how it fits into your forex trading strategy.

Trading volume tends to decrease during the ascending triangle pattern’s formation as with most triangle patterns. The ascending triangle is a bullish chart pattern formed during an uptrend and signals the continuation of the existing trend. This triangle chart pattern is fairly easy to recognize and assists traders to find entry and exit levels during an ongoing trend. Triangle patterns are aptly named because the upper and lower trendlines ultimately meet at the apex on the right side, forming a corner. These patterns are formed once the trading range of a stock or another security becomes narrow. As said earlier, the ascending triangle is a bullish formation that occurs in a mid-trend.

Buy if the breakout occurs to the upside, or short/sell if a breakout occurs to the downside. For example, if a long trade is taken on an upside breakout, a stop loss is placed just below the lower trendline. A minimum of two swing highs and two swing lows are required to form the ascending triangle’s trendlines. But a greater number of trendline touches tends to produce more reliable trading results.

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For example, in the chart above, notice how the highs are not within .01% of one another. Let’s review a few chart examples to drive home the point of the pattern. There needs to be a number of clear attempts by the bulls that go nowhere with the price. ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates. No matter your experience level, download our free trading guides and develop your skills.

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