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Trading Ascending and Descending Triangle Chart Pattern
Ascending or descending triangles are trend continuation chart pattern which when spotted; they manifest consolidation in the market and continuation of the actual trend on break of the pattern. Charts pattern trading system requires little patients to learn and practice different patterns; however the reward is worth the effort.
Ascending Triangle is a bullish chart pattern, which means after the pattern formation the price is expected to break above. The buyers in the market tried to break the resistance but are pushed back by the bears whereas the bears keep losing strength on every low thus forming upward trending support.
Ascending triangle pattern can be recognized by drawing two trend lines. The top resistance trend line is drawn horizontally, at level where price fail to break above whereas the second trend line connects a series of increasing troughs. An ascending triangle is believed to be a continuation pattern i.e. it is found in a period of consolidation within an uptrend. Usual Profit target for ascending triangle is vertical height of the triangle. Whereas the stoploss could be set bit lower than the last trough. Sometimes the price returns to the breakout level before the move began. At least two reaction highs and lows are required to form top horizontal line and lower ascending trend line. When the price breaks the resistance it could act as future support for the price.
Descending triangle is bearish counterpart of ascending triangle chart pattern. Descending triangle is bearish chart pattern, traders look to enter short position on break below the support level. It is made up of a descending resistance trend line, which connects series of lower highs and a horizontal trend line which historically proves to be strong support.
A descending triangle is believed to be a continuation pattern i.e. it is found in a period of consolidation within a downtrend. Descending Triangle pattern clearly shows that the demand of an asset is weakening and the downside momentum is likely to become stronger. The most common profit target set for descending triangle is the vertical distance between the two trend lines. Whereas the stoploss could be set bit higher than the last crest. Sometimes the price returns to the breakout level before the move began. At least two reaction highs and lows are required to form lower horizontal line and top descending trend line. When the price breaks the support it could act as future resistance for the price.
About the Author
I am full time Currency Speculator, and trading since last 6 years and trying to form a community of fellow traders, through which we can share and improve our trading skills.
I highly recommand that you visit my site, inorder to download free ebooks and other trading resources. http://www.ForexPatternSystem.com
15. How to Trade Triangle Chart Patterns Like a Pro Part 1
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