2010 February 21 | A Forex Trading and Techniques Blog

Forex Ascending Triangles:

An ascending triangle is a bullish pattern used in technical analysis and can be easily recognized. This is usually a pause during a longer trend. To say pattern as an ascending triangle it must have flat highs & higher lows. That means it should have a horizontal resistance line at the top and an ascending trend line at the bottom. Ascending triangles are bullish because the buyers are able to maintain a high price, but sellers can’t maintain a low price. Ascending triangles work best when the previous trend in the market is to the upside.

Check the following picture which shows an ascending triangle. A horizontal line is drawn at the top connecting the peaks and an ascending support trend line is drawn connecting the bottom troughs. This formed an ascending triangle.

Forex Ascending Triangle

Trading Entry: Since ascending triangles are bullish patterns wait until the top horizontal resistance line is broken with a strong candlestick. A strong candlestick means a candlestick which has a large body and small tails or no tails at all. Once the candlestick is completed enter the trade. Check the following picture. In the following picture the resistance line is broken with a strong candlestick. Moreover the candlestick does not have long tails. So it is a good opportunity to enter a long trade.

Forex ascending triangle broken with a strong candlestick body

If the resistance line is broken by the tail of a candlestick and not by the body of the candlestick and moreover if the candlestick has a long tail then do not enter the trade. Check the following picture. In the following picture the top resistance line is broken by the tail of the candlestick and not by the body of the candlestick. Moreover the candlestick has a long tail. So do not enter the trade.

Forex ascending triangle broken by the candlestick tail

Take profit and stop loss:

Once the top resistance line is broken with a strong candlestick, wait for the candlestick to be completed and enter the trade. Measure the base of the triangle. The difference between the top resistance line and the lowest low is the base of the triangle. The price difference should be the same amount as the breakout. Once breakout occurs enter trade. Set stop around 5 to 10 pips inside triangle. Set take profit target (limit) around 5 pips less than amount of the triangle base.

For example the base of the triangle is 50 pips. So the expected break out is 50 pips. Once the break out occurs the candlestick penetrated around 10 pips upward. So the remaining break out is 40 pips. Since we have to use the profit target around 5 pips below the expected break out the target will be 35 pips. Check the following picture.

Take profit and stop loss

The following are some of the real time examples.

AUDJPY Four Hour Chart Ascending Triangle:

The following is the four hour chart of AUDJPY. As of writing this article it formed an ascending triangle and the top resistance line was broken around 12 hours back. The base of the triangle is around 100 pips and the candlestick that broke the top resistance line has penetrated around 10 pips upward. So there is a potential profit target of 85 pips (5 pips taken out).

AUDJPY four hour chart ascending triangle

NZDUSD Four Hour Chart Ascending Triangle:

The following is the four hour chart of NZDUSD. The base of the triangle is around 110 pips and once the break out occurred it went up almost the same number of pips as the base of the ascending triangle.

NZDUSD four hour chart ascending triangle

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Forex Symmetrial Triangles

Symmetrical Triangles:

Symmetrical triangles are very common forex chart patterns. These represent a period of indecision. Symmetrical triangles are usually considered as a continuation of overall trend. A symmetrical triangle should contain at least two lower highs and two higher lows. When you see these higher lows and lower highs and join them a symmetrical triangle takes shape. Triangles represent a battle between buyers & sellers. This means that either buyers or sellers are not pushing the price far enough to make a clear trend.

Symmetrical triangles tend to breakout in the direction of the previous trend.

Check the following picture. It is showing higher lows and lower highs. When joined those lower highs and higher lows it formed a symmetrical triangle.

Forex Symmetrical Triangle

Trading Entry: Enter the trade when the top trend line or the bottom trend line is broken with a strong candlestick. A strong candlestick means a candlestick which has a large body with relatively small tails or no tails at all. Check the following picture. In the following picture the top trend line is broken with a strong candlestick. It does not have long tails compared to the body of the candlestick. So its a good opportunity to enter a long trade.

symmetrical triangle broken with a strong candlestick

If the candlestick has a long tail compared to the body of the candlestick and if the tail and not the body of the candlestick that break the top trend line or the bottom trend line then do not enter the trade. For example check the following picture. In the following picture a symmetrical triangle is shown and the symmetrical triangle top trend line is broken by the tail of the candlestick and not the body of the candlestick. Moreover the candlestick has a long tail compared to the body of the candlestick. So its not a good opportunity to enter the trade.

symmetrical triangle broken with a tail and not with the candlestick body

Take profit and stop loss:

Measure the base of the triangle. The price difference should be the same amount as the breakout.

We measure the base of the triangle by taking the price difference between the highest high and the lowest low once the triangle has started to form. Once breakout occurs enter trade. Set stop inside triangle. Set target (limit) for less than amount of the triangle base. Monitor trade until exit price is achieved. Breakouts from triangles tend to occur very quickly.

Check the following picture. In the following picture the difference between the highest high and the lowest low is 60 pips. So the potential break out will be 60 pips. Once the top trend line is broken by the candlestick, it penetrated 10 pips upwards. So the profit should be 50 more pips. But always use some less number of pips than the actual target. Since in the above example there are 50 pips more for profit put the take profit level 5 pips less than the original that means 45 pips. Set stop loss around 5 to 10 pips below the top trend line with in the triangle.

Take profit and stop loss

The following are some of the real time examples of the symmetrical triangles formed on different currency pairs price charts.

EURUSD Hourly Chart Symmetrical Triangle:

EURUSD hourly chart symmetrical triangle

NZDUSD four hour chart symmetrical triangle:

NZDUSD four hour chart symmetrical triangle

USDCAD hourly chart symmetrical triangle:

USDCAD hourly chart symmetrical triangle

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Forex Ascending Triangles

Forex Symmetrial Triangles

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