Triangle patterns are among the most popular winning patterns used by many traders. While the triangle is very much an independent pattern and is a reliable signal for future trends, it is also a commonly used pattern because it has greater chances of showing up in any trend.
In our previous articles, we’ve mentioned the dynamics of the triangle pattern as well as the kinds of Triangle patterns. So, for this article, we’ll provide you with a detailed guide on how you can improve on winning trades from actual trades on eToro and other trading platforms using the Triangle pattern.
(NOTE: Before we continue, we have to give a disclaimer that the trading products offered by the companies listed on this website carry a high level of risk and can result in the loss of all your funds. CFDs are complicated instruments that are never guaranteed to provide you supplemental earnings. In fact, Around 67% of all retail investors experienced a loss while trading CFDs. Make sure to keep this in mind before attempting to use the eToro platform yourself. All the information found on this website is not official trading advice and all practices shown are referenced for the use of the Demo account only.)
The Triangle Pattern
The Triangle Pattern is the most prominent and easiest pattern to find regardless of the chart or market trend. this is for the reason that it does not need a specific candlestick formation – it only requires an upper trend line and a lower trend line. The upper trend line is established by connecting the higher highs of a trend, and the lower trend line is established drawn by connecting the lower lows of a trend.
The upper and lower trend lines can either be inclined or sloped and horizontal. If the slope is directed upwards, the chances are great that the trend will pursue a bullish trend. on the other hand, if the slope or incline points downward, there will be great chances that the trend will become bearish.
There are many speculations about the result of a triangle depending on its classification – whether it is a symmetrical triangle, ascending, descending triangle, and so much more. However, the main point of dealing with a triangle pattern is the breakout point. Breakouts on a Triangle Pattern happen where the trend line has been breached or broken. If the breakout happens on the upper trend line, the market is bullish. On the other hand, if the breakout happens under the lower trend line, then the market is bearish.
How to implement the Triangle Pattern on an Actual Trade
First of all, the pattern can only be visible if the trend lines are drawn. Regardless of the time settings – whether per minute, hour, day, week, and others, triangle formations can always be found. the upper trend line is established by drawing a straight line that connects at least two of the higher highs in a trend. as mentioned earlier, the established upper trend line can either be horizontal or diagonal.
At the same time, the lower trend line is established by drawing a straight line that connects at least two lower lows of a trend. the lower trend line can also either be diagonal or horizontal.
As soon as the trend upper and lower trend line is established and the Triangle Pattern is now visible, determine the possible breakout points on either trend line. The breakout point would be where the price penetrates the trend line using a thick candle. In case the price does not penetrate the trend line and only touches it, it can be a case of pullback or bounce back – in this case, it would be a good chance to make profits from every price bounce in the triangle.
Below is an example of a bullish Triangle Pattern for the asset NVDA. We can find a series of Triangle pattern formations that led to a bullish trend.
Each upper trend line is established by drawing a straight line connecting the higher highs of the trend. The lower trend on the other hand is established by drawing a straight line that connects the lower lows. Each breakout happened when the price penetrated the upper trend line. The breakout price in this example is shown by a thick candle which represents the strength of the buyers. The thicker the breakout candle, the greater the chances of having the bullish trend continue further.
Attached below is also another example of a Triangle pattern formation, however for a bearish trend.
This example is for the asset – Gold, with a very prominent Triangle pattern. In this example, the pattern formed at the top or end of a bullish trend. Prior to breakdown was a series of lower highs wherein the upper trend line was drawn. We can also notice the lower trend line which was established by drawing a line that connects the lower lows of the trend. The breakdown happened as soon as the price penetrated the lower trend line.
Additional notes when trading the Triangle Pattern
As an added precaution when trading with the Triangle Pattern, it is best to consider indicators such as MACD, RSI, and volume as a confirmation. The MACD indicator uses two moving averages that intersect during price movement – upon the intersection (or confluence) of the moving averages, it can trigger either a buy or sell signal. By checking on the RSI, you would be able to determine if the stock or asset is oversold which can lead to a price rise or overbought which can lead to a price drop. Lastly, the volume indicates the strength of the current candle. By being mindful of these three indicators while assessing the Triangle Pattern, the odds of taking advantage of the market is increased.
Our final thoughts
The Triangle Pattern is indeed an easy and straightforward pattern, however, it can cause perilous losses if not evaluated or interpreted properly. Triangle patterns are almost always in any chart and it takes a good amount of practice to find them in a chart. Through constant practice via a virtual account on eToro, a trader is able to master this pattern and take full advantage of it.
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