One of the fundamental assumptions in price action technical analysis techniques is the assumption that asset price movements will create certain patterns that will repeat over time. repetitive price These are to develop and execute trading strategies.
from a large number of recurring price patterns There is one pattern that creates a triangle. that is, the triangle pattern This pattern is caused by resistance and support which inadvertently formed a triangle
This triangle pattern is further divided into three, namely: descending symmetry and triangle up where each pattern indicates a different trading signal. In this article, the author will only talk about the pattern. triangle up and indications, check out the full review below:
What is an ascending triangle pattern?
pattern triangle up It’s a triangle looking upwards. This pattern is characterized by a relatively flat resistance line and a sloping support line at the same time.
A fixed resistance line indicates that the asset’s high price is relatively the same over a period of time. On the other hand, a higher support line indicates that during that period. The bull market continues to press the market. so that the lowest price of the asset does not decrease and increases steadily.
This pattern occurs when the price changes several times and fails to break through the resistance (breakout) and sales force (sell) unable to push the price down further The price eventually bounced up and broke the resistance at a certain point.
So in general The formation of an ascending triangle pattern is considered valid. If the price change touches the resistance at least 2 times and touches the support 3 times
What does the Ascending Triangle mean?
outline ascending triangle pattern appear in the middle uptrend or the price goes up. The existence of this pattern directly indicates that the upward trend in the price of the related asset will continue (continuous pattern).
However, this pattern can also occur when prices are consolidating after the asset price tends to fall (downtrend). In this condition The existence of this pattern actually indicates a possible reversal. This indicates that the downward trend in asset prices will soon end.
Both of these apply to the note. First, the distance between the maximum end of the support line that creates this pattern is the maximum distance, or times the distance from the tip of the line to the top. Apex is the angle between the maximum end of the support line and the point. end of resistance If the distance between resistance and support is less than that The formation of this pattern is considered less valid and can actually be stimulating. price reversal (reversal).
Ascending Triangle Example
Figure 1 above shows how this pattern is formed. From the image above, it can be seen that the resistance line tends to be flat. While the support has created several new lows. This pattern ends when the price action breaks the resistance (breakout).
How to trade using an ascending triangle
First, you should open a position after a breakout. The reason is that it is possible that the price movements of these assets will move in the opposite direction than expected.
After the breakout happened You can open a position. buy on breakout Or buy an asset when a breakout occurs in the estimation that the asset price will rise. Conversely, you can place a Stop Loss at the price point which is at the highest support. The goal is if the asset’s price goes down. The system will automatically sell your assets to avoid greater losses.
Pros and cons of the Ascending Triangle
- easy to identify Ascending triangle pattern is one of the easiest price action to identify. Especially now that many trading platforms have a line drawing feature. with this feature Traders can clearly draw this pattern directly on the screen.
- Easy to use as a referenceThe second advantage of this price pattern is that the shape of this price pattern can be used as a reference in setting a target entry point. (due to the relatively flat resistance line) and stop-loss points (with the support line above)
- Traders can open positions before the pattern has fully formed.It is worth noting that traders can accurately predict the direction of the trend. This allows traders to buy assets at lower price levels than the breakout price.
- There is a chance of acne.You have to remember that there are two types of acne: real acne and fake acne. A false breakout can be a reversal signal, although in some cases the price action after the actual breakout also reverses. Therefore, risk management skills in trading are essential here.
- The price movement after an ascending triangle can also be a sideline or a reversal.. Therefore, traders should use other technical indicators in addition to using this single price action indicator.