Ascending Triangle: How to Spot and Trade This Bullish Pattern

Typically with a symmetrical triangle pattern, the expected directional breakout is unknown. The reason for this is that the bullish and the bearish move have equal strength as seen thru the price action. I am sure you have heard about chart patterns in Forex trading and their relation to technical analysis.

If price continues to move lower by at least 10%, then the chart pattern becomes a single busted ascending triangle. An ascending triangle is a bullish technical chart pattern that consists of a series of higher lows (forming the ascending trendline) and a flat, upper resistance level. The ascending triangle is one of the more common chart patterns traders use when trading various assets. Still, there is no 100% guarantee that it will work every time you spot it on a price chart.

Finally, you don’t need to use technical indicators to use the triangle pattern well. If price fails to move at least 10% in the new direction, then it is a triple busted ascending triangle pattern ascending triangle. Yes, it is a widely used and effective pattern in technical analysis, but it should be used in conjunction with other indicators like volume for best results.

What I am saying is the development of the pattern feels slow and arduous. While two bottoms belonging to the same trendline would suffice for pattern recognition, it is more favorable when there are more. Try our popular premium stock charting software, with proprietary trading tools and powerful stock screens. The image above shows the H4 chart of the USD/CHF Forex pair for Jan – Feb, 2016. The chart illustrates five triangle examples and their potential outcome.

Time Frame

First, it is important that you use them in combination with other technical indicators. The next important aspect of trading a triangle pattern is where to place the profit target. In most periods, traders first connect the starting parts of the triangle pattern as shown below. Then, you should draw the same line from the three-quarters of the triangle pattern to the expected direction of the breakout. In price action, they observe various patterns in the market and use this information to make predictions. In this strategy, they use technical indicators like moving averages sparingly.

What is the accuracy of Ascending Triangle Pattern?

Finally, always place a stop loss when trading an ascending triangle pattern. Even a breakout that is accompanied by high volume may fail, either resuming the ascending triangle pattern or initiating a reversal. This chart shows the stock breaking out of the triangle downward (blue dot), reversing, and shooting out the top of the triangle, busting the downward breakout. Almost half (46%) of ascending triangles with downward breakouts will bust (move higher), rising an average of 36% (to the ultimate high). Most (67%) of the busts are single ones (a move down followed by a move higher), so the chance of additional up-down cycles is less.

The stop loss gets reduced for narrower patterns, but the profit target still depends on the most important aspect of the pattern. False breakouts are crucial to consider while using this chart for trading. The price movement  oscillates, moving in and out of the pattern in either direction without breaking the upper resistance level. Traders generally enter a position on a security when its price breaks above or below the boundaries of an ascending triangle. Traders often protect their positions by placing a stop loss outside the opposite side of the pattern. To determine a profit target, it can be useful to start at the breakout point and then add or subtract the height of the triangle at its thickest point.

Rising Wedge

1. Technical analysts read the triangle as an indicator of a continuation of an existing trend or reversal.
2. The largest rising wedge 3 is used to illustrate target measurement for a reversal pattern.
3. The chart illustrates five triangle examples and their potential outcome.
4. The horizontal line represents a level of resistance—the point where sellers step in to return the price to lower levels.
5. Usually, traders watch for a move below the lower support trend line as it suggests that the downward momentum is building and a breakdown is coming.
6. Most (67%) of the busts are single ones (a move down followed by a move higher), so the chance of additional up-down cycles is less.

It is drawn by connecting two diagonal trendlines, with the result being a pointed pattern. A key difference between the ascending triangle and the rising wedge is the direction of their trendlines. The ascending triangle has a horizontal resistance line and an upward-sloping support line, suggesting a bullish breakout. Both patterns use volume to confirm breakouts, but they reflect opposing market sentiments.

As bullish activity increases, each successive low is higher than the last until the stock eventually breaks out above the resistance band. Trading the ascending triangle pattern offers a strategic advantage for those looking to capitalize on bullish market trends. Sometimes, what looks like a solid breakout can quickly reverse, resulting in a false breakout. Setting profit targets with the ascending triangle pattern is pretty straightforward. Finally, the price breaks above $100 with increased volume—a classic signal that the ascending triangle breakout strategy is in play.

1. This, in turn, gave the pattern a price springing effect, which subsequently allowed buyers to break through the ceiling and head higher.
2. The rising triangle pattern is usually considered a continuation setup formed in an uptrend.
3. Price pierces the top trendlineat A and confirms the chart pattern with an upward breakout.
4. An ascending triangle in the chart signals an increase in the asset price by a given range.
5. You can make informed decisions in your trades by understanding the pattern’s formation, differences from other patterns, and effective trading strategies.

A break of the trendline is only legit after the price closes outside the triangle and remains outside it. Placing an entry order above the top of the triangle and going for a target as high as the height of the formation would’ve yielded nice profits. Sometimes the resistance level is too strong, and there is simply not enough buying power to push it through.

A second key difference is their implications for market trends. The ascending triangle is a bullish continuation pattern, indicating a likely upward breakout and continuation of the current uptrend. In contrast, the Head and Shoulders pattern is a bearish reversal pattern, signaling a potential downward breakout and reversal from an uptrend to a downtrend. Ascending chart patterns can take weeks to months to fully develop. Each new test of the resistance area has the potential to break out, but traders should be wary of false breakouts. A sustained breakout will typically be accompanied by above-average trading volume.

Not only are you in a losing trade, but you are now wasting time sitting in the position all day. Next, notice how the stock breaks down through the uptrend line, only to shoot out the top. I remember how I would read a book on a specific chart pattern and then when I would go in the market, I could never find an exact match. Remember, with technical analysis, if you don’t keep it simple, you will begin to see things that aren’t even there on the chart. Premium cross-platform web charts with proprietary trading tools and powerful stock screens.

The price generally contracts within the ascending triangle pattern; eventually, one of the bears or the bulls wins. The reason I go with 4 is you want to make sure you are not using two swing lows for example and inflating that into a full-blown ascending triangle chart pattern. As you see from the example above, the potential target is based on the size of the triangle formation. With this type of measured move analysis, you will know what to expect from the symmetrical triangle breakout, whether it breaks upwards, or downwards.

An ascending triangle is formed by equal highs and higher lows. It is a bullish signal, whether encountered in an up- or down-trend. It is most often observed as a continuation pattern in an up-trend but is a strong reversal signal when witnessed in a down-trend. You should always try to wait for the close of the candle to confirm the breakout. There are different kinds of triangles that can be seen on a Forex chart. Before you jump into triangle trading you should understand the difference between the formations.