Client support: Phone: (+357) 22314160

FX & CFD trading involves significant risk

TeleTrade News

October 2014 14

Classic Triangle Patterns and How to Trade Them

Classic Triangle Patterns and How to Trade Them - TeleTrade A standard price channel involves parallel lines of support and resistance. In such cases, investors place their positions only at the points of rebound. There are common situations, however, where the lines are not parallel, converging or diverging over time. These distinct formations by non-parallel support and resistance lines are called chart patterns and traders should observe them closely, as they create trading signals.

Ιn this article we look at the classic triangle patterns and how to trade them.


Triangle patterns, as their name clearly implies, have the shape of a triangle. They are formed when the lines of support and resistance converge, with the price of the financial instrument bouncing between the two lines. Traders recognise three standard types of triangle patterns, which differ in structure and importance; the symmetrical, the ascending and the descending triangle. In these formations, the point at which the two trend lines extend and intersect is called the apex. The distance between the first high reversal point and the first low reversal point within the triangle is known as the base.

Symmetrical Triangle

A symmetrical triangle is usually regarded to be a continuation pattern, indicating a consolidation period during an upward trend or a downward trend, which is frequently followed by a continuance of the previous trend. This pattern is shaped with a support line that slopes upwards and a line of resistance that slopes downwards. From the unavoidable convergence of the lines at some point, the price is forced to penetrate one of them. The trading signal to open a trade will be given after a real breakout. In case that the breakout does not result in the continuation of the previous trend, but moves in the opposite direction, it indicates the generation of a new trend.

Let’s take as an example the real breakout of a resistance line, where the candlestick closes above the resistance level. The target must be determined using previous peaks shaped by the triangle. A trader may set several price targets, usually 2 or 3. The horizontal line from the nearest peak would be the most direct target, which can be reached 95% of the times. The second target can be determined by using the next peak, although it will take more time to be reached than the first one. Moreover, the possibilities of attaining it will be lower, as the higher the target, the lower the probability of reaching it, mostly 80% of times. Consequently, the third target would be the most remote one, with the lowest probability of attainment – approximately 65% of success. The same reasoning applies for cases of real penetration of the support line.

As you can tell from the above, the symmetrical triangle is a flexible pattern that serves all traders’ types. The ones searching for a moderate, but sure profit will opt to close their positions at the closest peak, while those with higher risk tolerance will close their positions at a higher peak.

Ascending Triangle

An ascending triangle is generally considered to be a bullish signal, indicating that the instrument price is moving to the north upon completion of the pattern. It is generated when a price bounces between a resistance line that is relatively flat or horizontal and a support line that is sloping upwards. As the two lines eventually converge, the probability of an upward breakout increases. This formation is generally regarded as a continuation pattern, as it usually follows an uptrend. There are cases, however, that you can find it after a downtrend.

The rising support line signifies that sellers are beginning to abandon the instrument. When they are eventually out of the game, the buyers will take the reins, pushing the price above the resistance line and continue moving upward.

A buy signal is created after a real breakout has taken place. Price targets are determined through a more complex process than with a symmetrical triangle, by first using the middle part of the triangle and calculating its height in pips, then dividing that figure by 2. In our example, the height is equal to 1.3300-1.3160= 140 pips. Therefore, the maximum target is 70 pips (140/2), and the price target equals to the breakout point of 1.3300 plus the 70 pip target appreciation or 1.3370.

Descending Triangle

A descending triangle is the exact opposite pattern of the previous one. It transmits a bearish indication to traders, implying that the instrument price will attempt a downside breakout upon completion. In a descending triangle, the support line is flat and the resistance line is descending. The descending triangle is also regarded to be a continuation pattern, as it usually follows a downward trend line. But again, there are cases that you can detect it after an uptrend.

This pattern suggests that buyers are attempting to push the price higher, but keep on finding resistance. Following their attempts to send the price higher, the buyers get weakened and the sellers overshadow them, a fact that drives the price lower.

Again, the operating principle is similar to that of the ascending triangle. The sell signal is given after a real breakout has occurred and the price target is set by using the middle part of the triangle and calculating its height in pips, then dividing that number by 2. In our case, the height is equal to 1.2800 – 1.2620= 180 pips. Thus, the maximum target is 90 pips (180/2), and the price target is equal to the breakout point of 1.2620 minus the 90 pips target or 1.2530.

Tip for traders

When trading chart patterns, traders have to be aware of a hidden risk. In technical analysis, chart lines are drawn by traders themselves and this human factor places a certain degree of inaccuracy. While an error equal to several pips on a one-hour chart wouldn’t be so important, an error equal to 15 – 20 pips on a daily chart could have significant financial consequences. Therefore, a trader must take into consideration all possible inaccuracies. In order to avoid such situations, a trader should under-shoot his targets by 5-10%. If, for instance, your anticipated target is 60 pips, enter your trade at the 50-55 level. By doing so, you will give yourself some room for error and keep your greed under control. This tip will pay off in the future and help you take control of your negative emotions.

  • 12 Jan 2017

    Dear clients,

    Please note that the new Client Agreement and new quotation regulations are applicable as of January 16, 2017. Under the new terms, the Stop Out level (forced closing of open positions) is 20% of the Margin. Please make sure beforehand that the margin is sufficient on your accounts.

    Best regards,

    The TeleTrade Team.

  • 10 Jan 2017

    Dear TeleTrade Customers!

    Please be advised about changes of trading hours in CFD instruments on 16 of January 2017 Martin Luther King Day in USA.

    Changes of trading sessions in CFD instruments on 16th of January 2017.

  • 21 Dec 2016

    Dear TeleТrade Clients,
    Please note the change of trading schedule on Christmas and New Year holidays 2016-2017.
    Change in Trading Sessions on CFD instruments for December 23-30, 2016 and January 2, 2017

  • 21 Dec 2016

    Dear clients,

    There will be changes to the margin requirements for the instrument USDMXN (US Dollar vs Mexican Peso) that will be effective from December 26, 2016. The margin requirement for this instrument will be 5%, which corresponds to the leverage of 1:20.

    Important: The margin for open positions will be recalculated due to these changes, therefore we recommend you to make sure beforehand that margin is sufficient to maintain open positions.

    Best regards,

    TeleTrade Team.

  • 20 Dec 2016

    Dear clients,

    The currency pair USDRUB will be available to trade from December 20, 2016. The leverage for this instrument is 1:50.

    The spread size is 0.50 for Standard Accounts and 0.40 for NDD Accounts.

    The instrument USDRUR will be switched to Close Only mode as the currency pair USDRUB is to be introduced.

    Best regards,

    TeleTrade Team.

  • 19 Dec 2016

    Dear clients,

    Starting December 26, 2016, instruments belonging to the 'Forex Extended' group will be switched to Close Only mode for users of the Synchronous Trading services. These changes are required to protect the interests of Investors as duplicating of trades might occur on linked accounts due to insufficient liquidity risk in this group of instruments, which doesn't meet the standards of these services.

    Clients which operate their trading accounts and haven't joined the mentioned services aren't affected by these changes.

    Best regards,

    TeleTrade team.

To maximize our visitors browsing experience TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. If you disagree, you may change your browser settings at any time. Read more

  • © 2011-2017 TeleTrade-DJ International Consulting Ltd

    TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

    The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

  • The information on this website is for informational purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

  • TeleTrade cooperates with SafeCharge Limited, which is an electronic money institution authorized and regulated by the Central Bank of Cyprus and is a principal member of MasterCard Europe and Visa Europe. We also cooperate with Moneybookers and Neteller, which offer electronic e-wallet services authorized and regulated by the Financial Conduct Authority.

    Please read our full Terms of Use.

  • To maximize our visitors browsing experience TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. If you disagree, you may change your browser settings at any time. Read more

    TeleTrade-DJ International Consulting Ltd currently does not provide its services to residents or nationals of the USA, and also doesn't provide retail Forex and CFD accounts to residents or nationals of Belgium.

Служба технической поддержки:

  • Онлайн-консультация
  • Заказать звонок
  • Написать письмо
Connect with Us
Share on
social networks
Request a callback
Top Page