An ascending triangle pattern is a medium-term continuation pattern used in technical analysis. It helps traders to forecast the future price movements of an asset and trade it more confidently. This triangle pattern shows points of entry, take-profit points, and stop-loss levels.
What Is an Ascending Triangle Pattern? Understanding the Basics
11 Feb, 2023
In technical analysis, the term “ascending triangle pattern” is used to refer to a certain chart pattern. It presents itself when there are price moves that allow for a straight, horizontal line to be drawn alongside the SHs (swing highs) and an upwards-sloping trend line to be drawn along the SLs (swing lows). These lines form a triangle. Experienced market analysts are frequently on the lookout for breakouts from such formations. It must be noted that a breakout can happen to either the downside or the upside.
Triangular patterns usually fall into the continuation patterns category since the price will normally break out in an analogous way to the trend that was present before the triangle pattern began to take form.
Most people use this triangle as a pattern that shows a distinct point of entry, take-profit point, or stop-loss level. Of course, with a broader understanding of this pattern, you will also be able to convert this knowledge into revenue when you exchange across the cryptocurrency market.
What Is an Ascending Triangle Pattern? What Can It Help You with?
As mentioned before, this pattern normally falls into the continuation pattern category, which means that it is significant if it shows up within a downtrend or an uptrend. When the breakout from the triangular shape happens, brokers are usually inclined to start buying or selling the asset in a very aggressive fashion, based on which way the price went.
Increasing the amount of stock helps to confirm the breakout as it signifies increased interest as the price escapes the pattern. It takes two or more SHs and SLs to form the trend lines of this pattern. The more trend line touches there are, the more dependable the predictions are.
At its most basic, this pattern shows that purchasers might not be able to break out of the supply line (represented by the horizontal line/resistance line). That leads to lows becoming higher – for instance, stocks might sell at higher price targets during an upward trend that keeps on touching the trend line up top. With the lows getting higher and higher, the trendline rises to reach the breakout point (the point located at the top of the triangle), which will create a type of trend reversal.
Identifying the Pattern
While the question of how to find ascending triangle pattern formations can be subjective, we really think that there is an objective answer to it: you have to watch out for steady resistance levels and rising trend lines. The levels show where prices reach their high point (a horizontal line that forms the top of the triangle). The line becomes the hypotenuse of the triangle, and it rises upwards as prices begin to reach higher lows.
How to Trade Ascending Triangle Pattern
Trading this pattern is not that difficult, actually. Here are the steps you need to take:
Recognize the uptrend;
Pay close attention to when candlesticks start to consolidate as the triangular pattern emerges;
Utilize a measuring technique to calculate a profit target if you know how to calculate ascending triangle pattern;
After witnessing a solid break above the supply line, you can enter a long position, setting a stop-loss level at the recent SL and take-profit level at the profit target you calculated previously.
Main Pros and Cons of the Pattern
Now with a better understanding of what an ascending triangle is, we can examine its greatest strengths and weaknesses. Before conducting further research and adding this instrument to your technical analysis tool belt, let’s list the pros and cons:
It is very simple to find this pattern on any chart; be it cryptocurrency trading or Forex, it’s very easy to pinpoint.
Fake-outs (or false/fake breakouts) occur commonly. This is when the bounds are slightly penetrated, but the full-blown breakout never comes into existence. That is an ascending triangle pattern probability that might interfere with reasonable market projections.
This pattern gives you a clearly defined target level if you do some calculations. Knowing the max height of the triangle, you can project profit targets.
Sideways movement. There is a very real possibility that the asset’s price will move sideways for a fairly long time. There is also a possibility it will move lower.
As a medium-term pattern, ascending triangle presents trading enthusiasts with an option to perform transactions within the triangle, but there is also a bigger picture - deals must be filtered in the trend’s main direction.
Different Types of Triangles
If you plan on diving deeper into the subject beyond the Exolix write-up right here, you’ll find more intricacies to this pattern. One of the more interesting things is that there exist two similar triangle-shaped patterns: symmetrical triangles and descending triangles.
A symmetrical triangle is a pattern where the slopes of highs and lows meet to form a triangular shape. This pattern signifies a point where the market is producing higher lows and lower highs. Neither people selling assets nor people buying assets are pushing the price level strong enough for a clear-cut trend to emerge. With what an ascending triangle pattern can show, you will find that a symmetrical triangle is less reliable. Here, we don’t really know in which direction a breakout will occur. We are not even sure if it’s going to occur at all.
A descending triangle is a pattern that is the opposite of the ascending one. Here, several lower highs create the upper line, the support line. Based on this pattern, you can predict with a fair amount of certainty that the price is about to go in a certain direction. In most cases, it simply breaks the upper line to continue its fall, so it might make sense for you to swap.
Frequently Asked Questions
First, you need to identify the pattern. Then, you need to draw trend lines – one connecting the highs and the other connecting the lows. Once either of the lines breaks, a trend reversal becomes possible. You will need to use additional indicators to make projections.
The pattern does show bullish trends. The upwards trend signifies a bullish pattern in market moves, while the two trend lines represent high and low points. This pattern usually takes a month or so to take shape and does not last longer than three months.