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Triangles are among the most important chart patterns a trader can serve, read on to find out how to apply them in trading.
Three triangles that all traders should know
Chart patterns can really help you identify the most lucrative trading opportunities. There are various types of patterns, what we will talk about today is that of the "Triangles". Triangles are a pattern in which the price of an asset such as a currency pair, a cryptocurrency, or a stock moves within a range that shrinks within two trend lines. These patterns can be formed in downward or upward trends, or within a specific range of trading, and can be used to predict future price movement. You know how to start trading operations.
There are three main types of triangles: symmetric, ascending or descending. In all three cases the pattern is formed by the convergence of the trend lines, but the difference lies in the way in which the lines converge. In the case of a symmetrical triangle, one trend line moves downwards, while the other upward, in the case of ascending or descending triangles, instead, one line is flat (horizontal), while the other moves up or down.
The symmetrical triangle is a sign of consolidation, often within a trend, but sometimes within a range of trading. Indicates that a balance of forces between rising and falling is in progress, which must be resolved before the future movement can continue. The pattern is typically linked to incoming events such as the publication of important data, the meeting of a central bank or the dissemination of a balance sheet on profits., so that the identification of potential catalyst elements can be of enormous help in trading.
If the shape pattern within a trend and breaks through in the direction of the trend, this is a clear sign of continuation. This happens when the prices of a trading range tend to continue the movement in the direction of the break. It is also possible to project the profit target using the same method. Measure the amount of a triangle from its upper point to its lower end and project it from the breaking point for the first target.
The ascending triangle is a strong sign of continuing to rise within an uptrend. It is formed when prices hit a resistance level and move down only to quickly return to the same level. This action creates a triangle with the flat top end and the bottom upward support line, waiting for buyers ready to buy the asset as soon as the price drops significantly.
This pattern is driven by momentum, the volume of buyers could eventually exceed that of sellers and cause a break. Since it is a continuation pattern, a trader can measure the height of the rally (or correction) that caused it and then project the amount obtained for the first profit target. For example, if a 40 pip rally produced an ascending triangle with the flat top, it is likely that the asset will move at least 40 pips once the break occurs.
The descending triangle is a strong downward continuation pattern and works in the opposite way to the ascending triangle. It is formed during a bearish trend and has a flat bottom to the support and a downward resistance line.
When the pattern reaches completion, ie it shows the break down, it signals a further fall in price.
This article does not represent an investment advice. Any reference to past movements or price levels is informative and based on external analyzes, we do not provide any guarantee that such movements or levels may reoccur in the future. In accordance with the requirements set by the European Securities and Markets Authority (ESMA), trading with binary and digital options is only available to customers categorized as professional clients.
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Source: IQOption blog 2018-11-14 10:31:13