With
symmetrical Triangles, trend lines converge with the support line is ascending and the resistance line descending. These patterns are easy to identify, and offer traders easy ranging trading opportunities.
But symmetrical-triangle breakouts are more difficult to deal with. Support and resistance lines do not give a clear indication of which direction a breakout will be. Thus technical analysts surveyed for this article suggest waiting after breakouts for a clear indication of new price direction.
Symmetrical Triangle
A triangle is formed between converging trend lines. One ascending support line, and one descending resistance line.
Ranging Signal
As triangle patterns form they suggest the market will be constrained by the trend line, offering ranging trading opportunities.
Breakout Signal
Because these patterns are converging, constricting price action to tighter and tighter trading ranges, they suggest that price action will eventually breakout. Swing traders will watch for breakouts as price action approaches the triangle's trend lines.
Fundamentally, triangles often form as uncertainty fills the market, and traders are unsure of where to take price. It is common for the market to form triangles leading up to major economic reports or news, as traders consolidate their positions and hold off entering the market until the impact of the expected release has been felt. The actual event may cause the market to move sharply, thus triangles often precede big breakouts in price action.
There are three types of triangle patterns, (
Symmetrical,
Ascending &
Descending) each suggest something different about price the future direction of price action.
