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Ascending triangles 1

October 27, 2011
Ascending triangle of NZD/JPY chart

In this post I am going discuss about how to trade on ascending triangles. These triangles have really worked for me and I like trading on breakouts in these triangles. Also a very good chart pattern to take trades with minimum risk. Here I discuss about the triangles which are bounded by a dynamic support line and a resistance line resistance line is shown in yellow. Here what happens is price tries to go up by making higher lows. When price meets the resistance line, again it comes back to dynamic support line and makes another higher low. After meeting dynamic support line again it goes to meet resistance line and comes back again to support line.  This happens repeatedly until price breaks the resistance line.

Because this is an uptrend, it is better to take only buy orders (go long).  When price goes up after meeting the dynamic support line, you can buy and you can take the profits when price meets the resistance line.  You can place your stop loss below the dynamic support line  or just below the previous low.

Important

  • Usually the breakouts of these ascending triangles occur to the upside most of the times. Because of this reason and as this is an uptrend it is better to go only for buy orders (go long).
  • Take trades after price met the dynamic support line at least 3 times. ( After making at least 3 higher lows ).
  • It is better to place your take profit target just below about 5 pips from the resistance line because sometimes price may not come to exactly to the resistance.
  • Sometimes price goes few pips above  from the resistance and it is normal and you should not think it as a breakout.

Breakouts in Ascending triangles

When trading on breakouts in ascending triangles, you can place a buy stop order at least 15 pips above  from the resistance line  and place your stop loss at least 10 pips below from the resistance line. You can see an upside breakout on EUR/USD chart in the figure given below.

Important

  • Usually breakouts occur with larger candles comparatively to other candles.
  • Sometimes it is better to wait until the candle which occurs at the breakout to close above the resistance at a reasonable height before entering to trade. ( To get away from false breakouts )
  • If the breakout to the upside was a false one, then the second real breakout is most likely to occur to the down side ( I have experience this number of times)
Breakout of ascending triangle in EUR/USD chart

Sometimes breakouts in ascending triangles occurs to down side also. You can see a downside breakout in NZD/JPY chart in the figure below. If you wish to trade on these breakouts you can place a sell stop order below the previous low of the triangle then your stop loss should be above the previous low. It is shown in the figure clearly.

Down side breakout of an ascending triangle in NZD/JPY chart

There are several types of ascending triangles and I hope to discuss about them in future posts. So try to identify these triangles in your charts and get some practice on trading these triangles in your demo account.

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2 Comments
  1. Can I just say what a relief to find someone who actually knows what theyre talking about on the internet. You definitely know how to bring an issue to light and make it important. More people need to read this and understand this side of the story. I cant believe youre not more popular because you definitely have the gift.

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