Triangles

Triangles are consolidation patterns where price coils into a narrowing range before breaking out. They reflect a market deciding its next direction.

The three types

• Ascending triangle — a flat resistance ceiling with a rising support line underneath. Buyers grow more aggressive; usually breaks upward.
• Descending triangle — a flat support floor with a falling resistance line above. Sellers grow more aggressive; usually breaks downward.
• Symmetrical triangle — both lines converge (lower highs and higher lows). It is neutral — it tends to continue the prior trend, but the breakout direction must be confirmed.

How to trade them

• Entry — on a decisive break of the converging line, preferably on rising volume (volume typically dries up inside the triangle and surges on the break).
• Stop — back inside the triangle.
• Target — project the height of the triangle's widest part from the breakout point.

The limitation

Triangles produce false breakouts frequently — price pokes through a line, sucks traders in, then snaps back. Volume confirmation matters here more than almost anywhere. Also, do not force the lines: if you have to ignore several touches to draw a clean triangle, the pattern is not really there.