Ascending Triangle & Descending Triangle Chart Pattern Explained

Wedges could have trend continuation, or trend reversal character. Typically the more powerful wedge formation is the potential trend reversal formation which occurs after a prolonged trend move. Trend continuationAfter price posts a strong break above the upper trendline, traders will look for confirmation of the pattern via continued upward momentum. When using triangle patterns, it is important to do several things.

1. An increase in volume during the breakout reinforces the validity of the pattern, giving traders more confidence in their positions.
2. A descending triangle pattern is a sequence of lower highs and a lower resistance level.
3. The bulls try to overcome the resistance level made by the bears several times by squeezing the price upwards from the bottom.
4. Ascending triangles are often called continuation patterns since price will typically break out in the same direction as the trend that was in place just prior to the triangle forming.
5. In other words, you should trade in the direction of the side, which has higher inclination.

As you can see, the price of crude oil is struggling to move past the declining and ascending levels. To do this, you need to connect the highest points of an asset. You will have a triangle pattern if the two lines form a pattern that looks like a triangle.

Where to place the take profit level when trading an ascending triangle pattern?

Ascending triangle patterns signal bullish market trends, offering traders clear entry and exit points based on support and resistance levels. In this strategy, traders observe an existing bullish trend and the formation of an ascending triangle, which suggests the potential for a continuation pattern. Incorporating a short-term moving average, such as a 9-period EMA, provides dynamic support, aligning with the trendline to strengthen the setup. An ascending or rising triangle is a bullish chart pattern that usually signals a trend continuation. The upper line connects highs placed at almost the same level, while the lower line is angled and connects higher lows.

Understanding Triangle Chart Patterns

This pattern indicates a period of consolidation, often preceding a breakout, which suggests that a significant price movement is likely. The ascending triangle is considered to be a continuation pattern. Continuation patterns occur within an uptrend or downtrend and signal that the price will continue to move in the same direction after the breakout occurs. Ascending patterns should therefore be anticipated during uptrends, and a breakout would signal a continuation of the rally. To find an ascending triangle pattern, look for a stock that had a strong uptrend and is now trading sideways. A horizontal area of resistance should be clearly visible in the chart, while drawing trendline across the stock’s lows should yield an ascending line.

Key Features:

1. The potential issue with this approach is you are exposed to more risk as you are buying at higher levels with greater downside exposure.
2. The image above shows the H4 chart of the USD/CHF Forex pair for Jan – Feb, 2016.
3. Short squeezes can introduce a lot of volatility into stocks and send share prices sharply higher.
4. The ascending triangle will buyers emerge and volume grow as the price breaks above the horizontal line.
5. The price of a stock in an ascending triangle pattern will oscillate between testing the resistance area and setting a series of lows, each one higher in price than the prior low.

Setting your stop loss there limits your risk while giving the trade enough room to breathe. When setting stop losses, you want to protect yourself if the trade doesn’t go as planned. If we set our short order below the bottom of the triangle, we could’ve caught some pips off that dive. If you had placed another entry order below the slope of the higher lows, then you would cancel it as soon as the first order was hit. In this example, if we placed an entry order above the slope of the lower highs, we would’ve been taken along for a nice ride up.

Another characteristic of an ascending triangle is that it provides a clear entry point, profit target and stop loss. A trader enters the position on the long side if the horizontal line turns to the upside. The ascending chart pattern is characterised by a horizontal trendline drawn along the swing highs and a rising trend line drawn along the swing lows. Ascending triangles are often called continuation patterns since price will typically break ascending triangle pattern out in the same direction as the trend that was in place just prior to the triangle forming. While the ascending triangle is considered a bullish continuation pattern, exceptions are quite possible. The largest rising wedge 3 is used to illustrate target measurement for a reversal pattern.

After that, you need to duplicate the tool using the “Clone” function and apply it from the level of the resistance line breakout to the expected profit target. Following a downtrend, a long-term bullish trend starts in the market. As you see, the price chart has drawn an ascending triangle characterized by a flat resistance level and a rising support line. An ascending triangle in the chart signals an increase in the asset price by a given range. A rising triangle is more likely to work out in an uptrend than in a downtrend. This is due to the fact that in an uptrend, the market is more dominated by bullish power and volume.

Ascending triangles form following an uptrend, and the pattern denotes the continuation of an uptrend. A stock should experience a suspected rising triangle after making significant gains before encountering resistance. As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!).

However, increased volumes aren’t the only tool used to confirm a breakout. Many traders consider trend indicators and oscillators to potentially limit the risks of bad trading decisions. Successful trading relies on having good information about the market for a stock. Price information is often visualized through technical charts, but traders can also benefit from data about the outstanding orders for a stock. They typically signal a continuation of an uptrend or, more rarely, a reversal of a downtrend. Price bounces between two converging trendlines, the top one is horizontal and the bottom one slopes upward.

These two types of triangles are both continuation patterns, except they have a different look. The descending triangle has a horizontal lower line, while the upper trendline is descending. This is the opposite of the ascending triangle, which has a rising lower trendline and a horizontal upper trendline. I show a chart of a busted ascending triangle in Bassett Furniture on the daily scale. Price pierces the top trendlineat A and confirms the chart pattern with an upward breakout. When price closes below the bottom of the triangle, which occurs at B,it busts the upward breakout.

The breakout is often accompanied by increased volume, confirming the bullish sentiment. This pattern is widely used by traders to identify possible entry points for long positions. The purpose of an ascending triangle pattern is to help traders identify potential bullish breakouts in a stock’s price. This pattern is formed when the stock’s price creates a series of higher lows, while the upper boundary of the pattern remains relatively flat. Traders typically look for high trading volume when the breakout occurs to confirm the validity of the pattern.

False breakouts can happen, and using additional tools may help traders avoid bad signals. It is important for every trader to recognize patterns as they form in the market. Patterns are vital in a trader’s quest to spot trends and predict future outcomes so that they can trade more successfully and profitably.