Mastering Ascending Triangle Pattern Trading Strategies

What Is an Ascending Triangle?

This pattern emerges when the price movement allows for a horizontal line to be drawn across the swing highs, while a rising trendline is drawn along the swing lows.

These two lines together form a triangle shape. Traders actively monitor triangle patterns for potential breakouts, which can occur either upward or downward.

Ascending triangles are often referred to as continuation patterns because they typically result in a breakout in the same direction as the prevailing trend that was present before the triangle formation.

This pattern offers traders a clear entry point, profit target, and stop-loss level, making it a tradable opportunity.

It is worth noting that an ascending triangle can be distinguished from a descending triangle.

‍

How to Identify and Use the Ascending Triangle Candlestick pattern

To identify the ascending triangle pattern, you need to look for a period of price consolidation within an ongoing uptrend. During this phase, the price will exhibit a series of lower highs and higher lows, indicating a temporary balance between buyers and sellers.

The upper resistance line of the pattern can be found by connecting at least two highs within the consolidation phase, while a rising trendline is drawn by connecting at least two higher lows.

Confirming the pattern involves ensuring that the price was in a clear uptrend before the consolidation phase,

the upper resistance line is horizontal or slightly slanted upward, and the rising trendline intersects with the upper resistance line.

Additionally, analyzing candlestick patterns within the consolidation phase, such as doji, hammer, or engulfing patterns, can provide further confirmation of buying pressure.

Once the ascending triangle pattern is confirmed, traders can set their entry and exit points. Typically, a long position is entered when the price breaks above the upper resistance line, indicating a bullish breakout.

The height of the triangle pattern can be used to estimate a target price level, and a stop-loss order should be placed below the pattern to manage risk.

‍

Key Takeaways

- Ascending triangles are considered a continuation pattern, as the price will typically break out of the triangle in the price direction prevailing before the triangle, although this won't always occur.

- The trendlines of a triangle need to run along at least two swing highs and two swing lows.

- A long trade is taken if the price breaks above the top of the pattern.

- A short trade is taken if the price breaks below the lower trendline.

- A profit target is calculated by taking the height of the triangle, at its thickest point, and adding or subtracting that to/from the breakout point.

- A stop loss is typically placed just outside the pattern on the opposite side from the breakout.