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Fibonacci Retracement Levels 88.6%

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Fibonacci levels are commonly used in trading to identify important price points and potential areas of support or resistance. These levels are derived from the Fibonacci sequence, a series of numbers in which each is the sum of the previous two numbers.

There are several different Fibonacci levels that can be useful for traders, including the 88.6% level, which represents the price level derived from the golden ratio.

When trading with Fibonacci levels, it’s important to keep an eye on these key price points and monitor for any potential reactions at these levels. When prices reach one of these key levels, there may be a strong buying or selling opportunity, depending on whether prices have been trending up or down before reaching that level.

All Fibonacci Retracement levels are  23.6%, 38.2%, 50%, 61.8%,  78.6%,  100% while expansion levels are 161.8%, 261.8%, and 423.6%. Additionally, some traders use Fibonacci levels derived from the golden ratio, such as 88.6% and 94.1%.

Overall, Fibonacci levels are an important tool for traders to use in their analysis and decision-making process when entering and exiting trades. By understanding how these price points work and reacting appropriately to them during trading, traders can potentially generate better returns over time by taking advantage of these key price points in the markets they trade.

In theory, fib. Extreme retracement after 88.6 is not a critical level. However, based on several case studies, the price oscillates around 88.6 to 100% Fib. Retracement very often before rejection or breakout moment.

Is 88.6% fibonacci retracement  level?

88.6 Fib. the level represents the price level derived from the golden ratio (0.618 x 0.618=0.786, 0.786 x 0.786 = 0.886= 88.6%).  Fibonacci Retracement Levels of 88.6% and 78.6% can be important in some cases, so traders need to monitor these levels and check if there are price reactions in this area. The best practice is to draw Fib. Retracements levels and Fibonacci expansion levels and analyze all price levels during the trading.

88.6% price level is derived by squaring (or multiplying by itself) from the Golden Ratio, 0.618:

0.618 x 0.618 = 0.786 (78.6%)
0.786 x 0.786 = 0.886 (88.6%)
0.886 x 0.886 = 0.941 (94.1%)

Learn more, in detail, articles about Fibonacci expansion levels.

Tips for Using the Minimum 88.6% Retracement with Fibonacci Pattern in Forex Trading

When you seek Fibonacci trading, there are three main patterns:
1. The use of multiple setbacks and extensions to identify price levels in different Fibonacci levels that overlap to produce “clusters.”
2. The use of multiple indicators like MACD in different Fibonacci levels.
3. The use of Fibonacci levels as a part of a larger graphic pattern, like in the “head and shoulders” pattern.
Fibonacci

Here, you would find information on a specific Fibonacci level focusing on trade and mostly in seclusion. It is a decline of 88.6%. This level was reached for summarization after using 0.618, the Golden Ratio, the square root, and the square to achieve 0886.

When it is exclaimed that it is achieved by making Fibonacci retracement, it means the retracement to 88.6% tells the range of the original characters. Therefore, the grains would decline if the starting step involved 100 pips up, retracing to 88.6. The unique thing about Fibonacci levels is that they are not influenced by a specific time. They feature the same importance as wanted in a weekly long-term chart or have a graphic instant five minutes.

The first price achieved a high Point X 1.1967 on 8th March 2009. Then, it came down to .9909 on the Y-Point on 22nd November 2009. Therefore, the price came down to 2058 points in 37 weeks. The Z price point reached 1.1730 on 30th May 2010, 28 weeks post Y point. When the figures and diagrams are examined, they were at 2 points, with the retracement level being 88.6%. This is unbelievable, as the price was up thousands of points for many weeks already, which precisely matches the primary Fibonacci levels.

When this level is identified, you will find a spotless hit giving a trader over 1000 pips when the trader chooses to stay put once the price retracement ends Point-Z. This was accompanied by the long-term decline in USD / CHF, which can be experienced even today. Else, finding that a basic Fibonacci level was clean and tested with success, an operator can make several trades in a short-span chart, even in 1 hour, seeking items for selling USD/CHF. Use a long-term plan while entering shorter-term time frames, keeping higher risk-reward ratios, and tight stop-loss in your trade.

One of the possible targets in your trades can be either the beginning of the retracement, expanding 100% of the starting movement, or Point Y, with the starting point being a little out of Point Y.

What is Bullish Reversal?

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Traders often gain profits by determining the price trends beforehand and favorably adjusting their actions. The most preached strategy to find out about stock value is through movement study based on the latest trends. This trend analysis gives an overview of the bull market, or simply the market where the price increases. Unfortunately, it can often turn the cards by trodding down to a bear market. But what is the meaning of the bullish reversal?

When the bear market moves opposite of its downward direction, a bullish reversal takes place. This helps traders spot opportunities for a perfect exit or the chance to indulge in more trading activity. However, an overview is hardly enough to become an expert in recognizing a bullish reversal. Hence, we have created this article to give you more condensed knowledge about the bullish reversal.

What is Bullish Reversal?

Bullish reversal represents a trading pattern when a downside trend on the chart begins to move in the opposite direction. Bullish reversal patterns indicate the possible future rising trend.

bullish engulfing pattern

 

Is bullish reversal good?

Yes, a bullish reversal pattern is an excellent trigger for BUY trades but only in combination with other technical and fundamental triggers. The best results bullish reversal patterns give when price touch a vital level (weekly high, weekly low, monthly high, monthly low, etc.), the bullish gain can be significant.

The stock market consists of 2 types of players. The first are the people who intend to buy the securities and increase the prices. On the other hand, some people have the intention to sell the shares and lower the prices. Trend analysis is the study of perceiving the opportunities on either side and making sound investment decisions. For instance, a bullish market indicates not to short your stock. Hence, being proficient in the identification of the market stages is crucial for building money making portfolio.

A Japanese candlestick aid in the exhibition of data for the movement of prices of the asset. It comprises up to and down movement along with the summary of opening and closing prices. Thus, it is a prominent tool traders use to analyze the market and pan out the information about asset prices.

The three characteristics of the candlestick are:

  • First, the body determines the open and close range.
  • Colors are the determinants of the price direction. For example, red and black symbolize a fall in price, while white and green color means an increase in the price.
  • Wicks indicate towards the low and high points.

Bullish reversal candlestick patterns

Bullish candlestick patterns are triggered following the downward trends, indicating an inversion in the movement of prices. Traders use this pattern recognition technique to find the suitable time for opening long positions and profiting from this upwards shift.

Bullish candlesticks insinuate many things, including the existence of buying force or a reversal signal. However, here are some patterns that aid the traders in finding their stance in the market for a good day.

The bullish hammer

A bullish hammer is visible near the base of the downward trend. This consists of a long wick that is low while the short body is on the upper side. The name is derived from its semblance. This pattern indicates that even if there is pressure to sell in the daytime, the prices will rise again due to the hefty purchasing pressure. The bull market goes on strong if the color of the candlestick is not red but green.

hammer reversal candlesticks

Bullish inverted hammer

The hammer and inverted hammer are similar in some aspects, with some differences in appearance. The inverted hammer has a short body accompanied by an upper wick that sports a long length. This pattern can be seen in a downward trend after a black body.

This pattern determines that the pressure to sell after the buying trend is insufficient to downward the stock price. Conversely, if it has an upward wick, understand that bulls are trying to take over the market through tactics to raise the price.

The shooting star and inverted hammer are often confused with each other. However, the shooting star is different because it is dominant on rising price trends and indicates a bearish market.

Bullish Inverted Hammer Candlestick Pattern

Bullish engulfing

The bullish engulfing pattern consists of 2 candlestick patterns. The first candle has a short body. The other candle engulfs the former. The first candle often sports red and black color and the 2nd one is white or green.

In more situations, the white wick can have a slight upper wick. It determines if the closing price might be the highest of the day. When there is no upper wick, it signals that the prices will be much higher the next day, and this is a white-colored candlestick. A black candlestick may also upper on the following day after witnessing an opening gap.

This bullish engulfing pattern comes out of hiding when the prices are lower on the 2nd day than on the first day. If this does not occur, the white candlestick will not engulf the black-colored candle for the next day.

bullish engulfing pattern

Bullish Three white soldiers

This occurs in the presence of 3 long bullish candlesticks that gesture towards a reversed downtrend. The three candlesticks have openings that lower after every consecutive one, and the closing price increases every time. The bodies of these candles are long, with a short wick providing an appearance like a staircase.

The bulls are predominant in this pattern, and they lead to high closing prices. These three white soldiers can be utilized as entry and exit points by traders.

If you are leaning towards a bullish position, this might be a good entry point for you. At the same time, you should exit if you have fewer securities. However, before making any decision, make sure to study the pattern.

If these candles are long, short-sellers can take over and lead to a fall in the asset.

Bullish Three white soldiers

 

Bullish morning star

This pattern also consists of 3 candlesticks signaling towards a bottom reversal. The pattern starts with a short candlestick, a red or black long candlestick, that forms a star by gaping down. Candle 3 can be green or white. The first session of the black body is closed by this candle.

The bullish morning star shows a slow downward movement, leading to an upward trend before a bullish move. The market flatlines here because the indecisions vanish, and the pressure to sell recedes. Bulls identify this as an opportunity and curb the shares from being sold.

bullish reversal morning star forex pattern

Bullish piercing line

This pattern favors the bullish market and appears near the bottom of a downtrend. It comprises two candlesticks with long bodies. The black or red candle is followed by a white or green candle that is lower.

This coerces to buy because there is a price hike till the mid-price of the former day. This pattern stays for two days, given the 1st is for sellers and the 2nd is for buyers.

Piercing pattern candlesticks

Conclusion

These candlesticks patterns help understand the proper entry and exit points and give important information regarding prices, reversal warnings, and trend signals. 

Once you are proficient in reading these patterns, you can find the changes in sentiments and define downtrend reversals with avenues for long gains. These candlestick patterns are handy in finding out about future trend reversals. However, ensure that you recheck the existence of reversals by following the price actions before indulging in trade.

Megaphone Chart Pattern Success Rate – Case Study

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Megaphone chart pattern was described for the first time in Richard Schabacker’s 1932 book: “Technical Analysis and Stock Market Profits.”

What is a megaphone chart pattern?

Megaphone chart pattern (well-known term) or Broadening formation (the term from books) is a reverse symmetrical triangle trading pattern formed on increasing price volatility and diagrammed as two diverging trend lines, one rising and one falling. Megaphone pattern consists of two higher highs and two lower lows, and it is formed during high volatility periods.

megaphone chart pattern bearish

 

Megaphone patterns

Another chart pattern employ in technical analysis is the megaphone pattern. Again, the wide formation is a good hint into the risen risk that accompanies change.
The stock market comprises two giants, that is, buyers and sellers. The contest between the duo forms patterns in the market. Therefore, knowing and identify what patterns stand for is very important.

The way megaphone patterns form earns it a name, ‘broadening formation.’ Stock does migrate without a definite direction due to high volatility. Thus formed megaphone patterns. Higher gets high, and lower gets low simultaneously as a result.
Nevertheless, using a megaphone pattern, one can get both lower lows and higher highs. As a result, there is no direction. Therefore, an essential aspect of this pattern is trend lines.

Example: Bullish megaphone chart pattern on Weekly timeframe

What does a long-term megaphone pattern mean? In this case, we can see several weeks of a bullish trend after the megaphone pattern is formed.
megaphone chart pattern bullish

Thus, one must be good at joining the dots; else, it assumes a triangle pattern. This will end up changing the way one trades.

Example: Berish megaphone chart pattern :

bearish megaphone chart pattern example
Forming broadening formation is by using the trend line to link the higher highs and lower lows. Thus, the shape of megaphone patterns is just like a reverse triangle.

Megaphone stock pattern

A megaphone stock pattern is a widening pattern that looks like a megaphone or reverses a symmetrical triangle.

Let us see some examples:

 

Trading megaphone pattern

To trade a megaphone pattern, we need to detect two higher highs and two lower lows formed during high volatility periods. In that case, we will sell if we see a bullish trend breakout, or we will buy if we see a bearish trend breakout.

When the market starts having a higher risk for a long period of time, then megaphone patterns start forming. One of the key factors contributing to megaphone formation is the election. The reason being that electing a particular leader can change the affair of things in a country. Which later affects the market. Since the political clime is not stable, then the market keeps on fluctuating.
Megaphone pattern also forms as a result of the earnings season. Earning reports from companies affect the stock. Earnings may have both good and bad sides. And this causes different reactions—one such reaction results in broadening formation.

Megaphone patterns are usually seeing as bearish patterns. This is because it is a reverse symmetrical triangle. At the same time, normal symmetrical triangles are neutral.

Is the coil pattern the same as the megaphone stock chart pattern?

No, the Coil pattern is the symmetrical triangle, and the megaphone pattern is the reverse symmetrical triangle.
Swing as well as day trading both capitalize on volatility. Single direction has always been a suitable path that long-term investors want to trade.
To successfully trade various patterns, our course on day trading will be helpful. In a volatile pattern, it is better to trade around the trend lines. All base on one style, while hitting angular support, it’s very much best to go long. Also, while hitting angular resistance, go short.

 

A significant part of technical analysis is trend lines. This results in swing and day traders profit from the change of a broadening formation.
Up to 2 weeks, Swing trading holds overnight. It’s all has to do with one risk management. Technical pointers are in place to assist one get in and out of trades as soon as possible. The trend lines can be used as entry and exit points also as stop losses. The broadening of megaphone patterns indicates the potential to profit is higher. This can also be indicative that the potential for loss is higher.
Thus, there’s a need to trade with effective risk management. Use the technical pointers to self-advantage. The small candlestick 2 to 3 patterns are also useful. The combination of these can provide great entries as well as exits.

Megaphone chart pattern case study

Methodology: In our research, we tried the Pointzero Megaphone indicator (an excellent megaphone chart indicator) and tested the last 10 years for EURUSD, GBPUSD, USDCAD, AUDUSD, NZDUSD on H1, H4, and Daily chart.

We created a test using the Visual Testing tool in Metatrader :
Megaphone chart pattern case study test

Results :

Currency pairsH1 chartH4 chartDaily chart
EURUSD51%54%55%
GBPUSD45%48%47%
USDCAD47%49%51%
AUDUSD50%53%51%
NZDUSD45%49%52%

Discussion :
The results were terrible. We tried to see at least a 1:0.8 risk-reward ratio. For 1 risk and 1 reward, test results will be worse than in our research.
Visual and manual observations make our tests, so we accept any critique.

Trading Megaphone pattern:

How to trade megaphone patterns?

The trading megaphone pattern implies a reverse symmetrical triangle trading pattern identification, but it is a very complex strategy because many false signals exist. The approach uses important price levels for stop loss, enter position and target, and several additional triggers, not only megaphone patterns. For example, divergence and trend lines together with megaphone patterns are excellent triggers to enter into trade. 

Megaphone patterns are often most suitable for day and swing traders. However, long-term investors can also use it to use as a sign to support their investments. Like any trading style, it’s better to study and learn the different patterns and what they stand for.

Very often, I got the question: “How do you trade megaphones pattern intraday.” I avoid trading this pattern on lower time frames and intraday, and I try to use it only on H4, Daily, and Weekly chart time frames.

The practice trading account begins with opening a paper trading account. As a result, you’ll get good at drawing trend lines and linking the dots to arrive at different patterns, which is a crucial part of trading. Innal opinion, the success rate, based on our tests, the success rate is bad, and we avoid using this pattern in the trading decisions for smaller time frames. Of course, the weekly and monthly charts can be interesting for this pattern.

Piercing Pattern Candlestick

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What is a piercing line candlestick pattern?

Piercing line candlestick pattern or piercing candlesticks represent a two-day reversal pattern on the daily chart from strong bullish trend to downtrend and vice verse. The chart shows this pattern as a substantial gap between the first day’s closing price and the second day’s opening price.

Piercing pattern candlesticks

 

What is a bullish piercing candlestick pattern?

Bullish piercing candlestick pattern has the first bearish daily candle, a substantial gap lower from the first day’s closing price to the second day’s opening price and the second strong bullish candle.

A 2-day candlestick valuation pattern spots an efficient short-ended rebound, heading uptrend through a downtrend. This pattern covers the initial day commencing adjacent to highs and ending adjacent to lows, accompanied by a regular or a more extensive business scope.

The piercing pattern also covers a crack downward at the end of day one and initiation of day two, starting from lows and ending adjacent to highs. The closure has to be a candlestick which includes friction of the uptrend length at its minimum from red candlestick from earlier days.

 

What is a bearish piercing candlestick pattern?

Bearish piercing candlestick pattern has the first bullish daily candle, a substantial gap higher from the first day’s closing price to the second day’s opening price and the second strong bearish candle.

Major Outcomes

A two-day candlestick valuation pattern spots an efficient short-ended rebound, heading uptrend through a downtrend and vice versa.
Piercing Pattern gives a projection for five days only on the daily chart
There are three aspects of the pricking pattern that covers a downtrend before the pattern, a crack as the day one ends & a rigid rebound as the 2nd candlestick into the pattern.

Working of Piercing Pattern

Piercing patterns characterize 2 days out of which the 1st day is firmly motivated by auctioneers and the 2nd day is recognized by eager purchasers. This efficiently indicates the number of stock people in the market who wish to auction has reduced to a certain level. Also, the value of shares has dropped to the extent that people are procuring more and has been noted. Such aggression looks dependable for short-term uptrend assumptions.

Formation of the piercing pattern

It is considered among the crucial candlestick patterns that professionally investigate typical marks on the value sequence chart. A duo makes the piercing pattern of successive candlesticks voiced earlier & has 3 more crucial aspects.

A downtrend value anticipates the piercing pattern. (it might be a slight downward flow, yet if the candlesticks are noticed next to rising in value, then it’s not a crucial rebound indication)

Cracks in value initiate from low on the 2nd day. (such pattern is generally observed in stock as its capability of facing cracks overnight compared to rest currencies or all-time flowing resources. However, such patterns might take place in any resource upon a weekly graph).

The 2nd candle should seize beyond the middle spot of the 1st candlestick. (It represents that the purchaser overpowered the auctioneer that day.)

The 1st candlestick is generally dusk colored or red, representing a downward day, and the 2nd is green or luminous colored, representing a day that will close high compared to its opening. Thus, when a dealer is looking for a bullish rebound, a random red candle pursued by a white candle can be a signal to be cautious; however, the piercing pattern proves to be a certain signal as the rebound is mostly unpredictable for major shareholders of the market.

Piercing pattern is a tactical investigation for being an efficient bullish rebound (bearish vice verse). Emergence in its severe mode is not often, however, in the case of performing a good protracted downward trend in its front. At the time of tactical research by Stochastic, MACD, or RSI indicating bullish diversity, a piercing pattern is observed, intensifying the possibilities of the two-day pattern.

White candle reversal on the 2nd day through a downward crack to a median ending higher than expected can also signal that a backing level has arrived. This might happen because the crucial stakeholders of the market have settled the initiating values low compared to a closure of the previous day. As this occurs when the market opens, eager purchasing agents might move forward and switch the values from the commencement of the dealing hours.

Hence, a piercing pattern could be affirmed if it happens on the back front line of a valuation route, where purchasing is already an active part. This pattern is traditionally an efficient indication for a rebound; thus, by concentrating on a piercing pattern, a dealer can think of observing a separating crack. The piercing pattern pursued by a break-away gap can be a rigid indication of rebound happening.

In a bullish rebound, dealers usually get two well-known choices. First, they are allowed to purchase a share from an upward momentum. Also, they might decide to purchase a share in the cash call options with a smacking value beneath the market’s present value.

How to Trade Ascending Triangle Pattern? – Triangle Pattern

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Amongst the many available indicators in the financial market, triangle patterns are pretty famous and preferred by many traders. A trader can use the triangle pattern in the forex market to better view the movement of the price in the coming future. The trader can also predict the trend that may follow with the help of the triangle patterns.

There are three types of triangle patterns that can be commonly seen in the forex market. Each pattern has its characteristics and different ways to interpret them.  

In this article, you will read about different types of triangle forex patterns, how they can be interpreted and how to trade with the help of these patterns.

What Are Triangle Patterns?

Triangle patterns represent triangle-like shapes on trading charts which usually refer to a trend continuation.

Forex triangle pattern

A triangle pattern in forex is a pattern that can be seen primarily in the middle of a trend. This pattern usually indicates that the trend will continue. This pattern is straightforward to be traced on the price chart. It is made up of two lines that converge at a point. Both the lines are formed, joining the movement of price in the market. There is an upper trendline that joins the high points and a lower trendline that joins the lows. When the price movement breaks out of this pattern in the same direction as the ongoing trend, the traders plan to enter the market. 

There are many charts available for technical analysis in the market. But the most commonly used by traders are only three or four. The trader can learn and use the triangle patterns on the chart they are familiar with.

What is a Symmetrical Triangle Pattern?

Like any other triangle pattern, this pattern is drawn by joining two converging trendlines on a chart. This particular triangle pattern is also seen as a starting point for all other triangle patterns in the market. While different patterns may depict that they bend towards a specific direction, a symmetrical triangle is more direction neutral. That is, it does not fall or turn in any order. But, just like other triangle patterns, this pattern also indicates the continuation of the ongoing trend. And so, here also, traders look for breakouts towards the current trend.

Symmetrical Triangle

How to Trade with a Symmetrical Triangle Pattern?

One of the benefits of trading with a triangle pattern is that it comes with its measuring technique. This technique can be used in any triangle pattern. Traders can calculate the ‘take profit’ target and trade accordingly.

To measure this ‘take profit’ target, the trader has to measure the distance between the upper and lower trendline at the beginning of the pattern and use the exact measurement to determine the profit target after the breakout occurs.

Amongst other triangle patterns, the symmetrical triangle is rare to find. That is why traders are advised not to blindly jump into trading and make sure they have not made any mistakes while spotting the triangle pattern.

Ascending Triangle Pattern

The ascending triangle pattern represents a rising trend pattern that implies a flat top with higher lows and shows the beginning of a bullish trend.

The ascending triangle pattern can be identified with a flatter upper trendline and a rising lower trendline. The flat upper trendline acts as a support or resistance to the price movement, while the increasing lower trendline indicates the higher lows. These higher lows show that the buyers are more active than the sellers. When there is a breakout in the pattern, it usually follows the uptrend or bullish trend. 

Apart from all the indicators available as an option to all the traders, an ascending triangle can give assurance of the price action predictions. Appearing in the middle of the trend, it is also known as a continuation pattern. This pattern helps anticipate the move of the trend in the market and helps the traders plan their trade accordingly.

Read this article to understand ascending triangle patterns and how to trade with ascending triangles.

The ascending triangle is a pattern that can be identified with a straight upper line, which is also the support line of the pattern. The lower line of the triangle is slanting upwards, marking the higher lows. This pattern indicates that a bullish trend is approaching as the buyers are more active than the sellers when this pattern appears. The breakout in the pattern confirms the continuation of the bullish trend.

The ascending triangle may confirm that a bullish trend is approaching, but whether it is a continuation of the direction or a reversal depends upon where the pattern occurs in the trend. For example, if the pattern is seen during a downtrend or maybe at the bottom of it, it may mark the end of the downtrend and hence the reversal in the trend. So, the traders should be aware of the location of the ascending triangle.

 

The traders who have been trading in the forex now will quickly identify the ascending triangle pattern in the charts. Following are some key points that traders can look for to identify the pattern more easily:

  • Upward Trend: Traders are always advised not to blindly jump into trading once they spot an ascending triangle in the trend. They should make sure if the market were in an upward trend before they saw the ascending triangle.
  • Consolidating Market: Traders should be aware when the market becomes consolidated because that is when the ascending triangle may appear in the market.
  • Rising lower trendline: Ascending triangle is characterized by its upward slanting bottom line. This line is drawn to join the lows in the trend, which shows the situation of a rising low. This indicates that the market is entering a bullish trend due to more active buyers than sellers.
  • Flat Support Line:  The support line or the upper line is flatter and works as a support or resistance for the trend. In simple words, if you look at the pattern, whenever the price touches this line, it bounces back before the breakout occurs.
  • Continuation in Trend: The bullish trend continues after the price breaks out of the upper trendline. To confirm the continuation of this trend, the trader must look if the price continues to move upward.

How to Measure Ascending Triangle? 

While many traders may know how to measure the ascending triangle, many may not see that pattern comes with its in-built profit measuring technique.

It’s a simple technique with merely two steps to measure the profit the trader should aim for or can expect after the breakthrough in this pattern, stating that the trend must continue.

The first step of the two is to measure the distance between the lowest point that lies on the bottom trendline and the flat upper line at the beginning of the pattern. The next step is to take the same distance and measure the possible profit from the breakthrough point.

Using this technique, the trader can aim for profit and plan his trading accordingly.

Ascendant Triangle Advantages and Drawbacks

The ascending triangle is a trader-friendly pattern. It helps the trader understand the trend if there will be a reversal or continuation in the trend. But everything comes with its limitations, and the ascending triangle is no exception to that fact.

Advantages

  • This pattern is easier to identify. Even beginners can do trace this pattern with little knowledge.
  • This pattern can confirm the continuation or reversal of an upward trend, attracting more and more buyers.
  • Its in-built measuring technique is easy to use and helps the trader identify the possible profits.

Drawbacks

  • Since the trend in this pattern is confirmed only after the breakout, there can be a false breakout. So the traders are advised to have good risk management.
  • It is not always necessary that the price will move within the pattern. It can or may move lower or sideways of the triangle.

How to Trade with Ascending Triangle?

Just like the symmetrical triangle pattern, a trader can measure the distance between the flat upper trendline and the ascending lower trendline and use the same distance to measure the profit target after the breakout. Traders are advised to ensure that the trend follows after the breakout and is not a false breakout. 

Descending Triangle Pattern

Just like the name, the descending triangle pattern is quite the opposite of the ascending triangle pattern. This pattern has a flatter lower trendline and a downward slanting upper trendline. Here, the flat lower trendline acts as a support or resistance, and the upper descending trendline indicates the lower highs. The lower high shows that the sellers are more active in the market as compared to buyers. 

Descending Triangle

How to Trade Descending Triangle Pattern?

Unlike symmetrical and ascending triangle patterns, the breakout in descending triangles usually occurs with a downward trend, which indicates that the buyers sit back and the sellers try to bring the price down. This break from the lower support line encourages the trader to go short. Traders put a stop loss just above the slanting upper trendline. But the take profit target here is used by calculating the same distance at the beginning of the pattern and putting it downwards at the beginning of the breakout. 

Conclusion

After reading all three types of triangle patterns, the trader must try to keep the following points in mind while trading these patterns.

  1. The trader must be aware of the trend preceding the triangle pattern formation. This is one of the critical points to determine the future movement of the price. 
  2. Traders must adequately understand how to use the measuring technique discussed above to identify the profit target.
  3. Traders must look out for false breakouts that are not uncommon. They must also have a sound risk management plan to battle any unexpected loss. 
  4. The trader must be efficient in distinguishing between the upper and lower trendline to understand which type of triangle pattern will occur. 
  5. Traders are also advised to first practice identifying these patterns before actually trading with them. Because of their similar looks, traders can get easily mistaken. 
  6. It is crucial to understand that traders must understand what the price action indicates instead of looking for the desired pattern in the forex price chart.
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