Triangle trading patterns are highly dominant in the Forex market. Forex trading needs good forecasting techniques to identify the bullish or the bearish market. Triangle trading, also known as “Pattern Trading” are a result of binding of two lines of trend viz. the support line and the resistance line. The support line shows an upward trend while the resistance line sloped downwards.
The market price fluctuates between the two trend lines of the triangle, while it continues to hit the peak and bottom points of the triangle. Traders usually rely on the triangle trading pattern only if the market price shows at least 4 hits on the ‘triangle’. These triangles are dynamic during the highly liquid trading hours.
In the Forex market, the pressure upsurges on the triangle pattern when the market price of the currency fluctuates lesser than expected. Similarly, when the traders act in the favor of the trends, the price can go high and strong, thus releasing the pressure.
The market trend is equally important as the shape of the triangle, while determining the breakouts. Smart traders trade only after the market price breakouts the higher or lower trend line. It is difficult to predict if the bulls or bears will get stronger and so its smarter to wait for the market price to depict the trends. The market turns bullish when the market price goes above the resistance line and bearish when it drops below the support line.
When support line gets higher and the resistance line gets lower, the pattern becomes narrow. Thus we come across three different triangle patterns – ascending, descending and symmetrical triangle.
The ascending triangle prevails when the market shows an upward trend with the ‘bulls’ getting stronger than the ‘bears’, touching the resistance line of trend. The market tends to see deep ‘lows’, but ‘highs’ at same level. This pattern prevails highly when market is ‘up’. If you notice it in a bearish scenario, it can be a hidden sign of reverse attack.
The descending triangle is exactly the opposite and visible in a downward market trend. The ‘bears’ dominate this pattern of trading, touching the support line of trend. The market tends to see deep ‘highs’, but ‘lows’ at same level. It prevails highly when market is ‘down’. If noticed it in a bullish scenario, it can be a hidden sign of reverse attack.
The symmetrical triangle pattern is a middle scenario, where the market shows “low highs” and “high lows” in the price patterns. Such pattern is termed as “market with no direction”. Neither the bulls nor the bears dominate the trading pattern. This triangle is considered as a continuation pattern if noticed during a “high” market, as it may breakout on the upper side. Similarly, it may be considered as a reversal pattern if notice during a “low” market, as it may breakout on the lower side.
So this sums up the triangle trading patterns. As said, the wise trader needs to study these patterns before locking his money into any trade.