Triangle pattern frequently appear in price charts on financial markets such as stocks, forex, virtual money .... When this model appears, it will create trading opportunities, helping investors to be ready for anticipation options because prices can go in any direction. The triangle price model has 3 types, including: isosceles triangle, rising triangle and price reduction.
Balance triangle model
In an isosceles triangle model, the price action will be lower high than the previous high and lower high. This shows that the strength of the buying and selling sides are equal.
Visually, when the price movement is gradually decreasing, focusing on each other, it is at some point forced to go out of the model according to nature. Regardless of the direction in which the price is randomized, it affects the psychology of investors. They see it as a breakout and many traders will trade in the direction of the break, pushing prices further.
Psychologically, this pattern represents a pause in a trend. So if nothing special, the price often tends to go forward. However, this is also a quite sensitive period, because the beliefs of both sides are very fragile. If there is strong enough news on either side, the price will break out and go with that side.
Trading strategies based on an isosceles triangle
As analyzed above, you understand the possibilities of the next evolution of price. Therefore, a reasonable trading strategy with an isosceles triangle pattern is that you should place pending orders in both directions. You place an order to buy at the top, just in case the price breaks up. You place a sell order at the bottom just in case the price breaks down. In either case the price goes up or down, an order will be matched and an order will be canceled, and thus you will be profitable.
However, making money on the market is not so easy and simple. All the books, documents, or teachers who teach you that much are superficial and irresponsible. To trade effectively with an isosceles triangle, you need to understand how to trade when prices break out. So I suggest you read my following article:
Increased triangle pattern
In the rising triangle pattern, the posterior peaks are equal to the previous peaks, the latter troughs are higher than the previous troughs. Although the meaning of the word "rise" in the rising triangle pattern shows the following troughs are higher than the previous troughs. But on the other hand, this pattern is only in an uptrend.
Visually, just like the isosceles triangle model above, I won't say more here. However, compared to the isosceles triangle, the uptrend triangle shows a stronger inclination to buy.
Psychologically, it also shows the pause of the price. Previous buyers felt that the price had increased significantly and sold down, but the sellers only sold when it reached its peak, forming a horizontal resistance line. But the price is constantly being pushed up, this movement is mainly due to the basic information element behind it creating the belief that prices are still rising.
If you are a stock market, you can find more information on trading volume. If the trading volume increases during this sensitive period of the rising triangle pattern, it is likely that the price will break out.
For other markets such as forex, although you do not see the volume, but psychologically, intuitively and experience shows that the probability of a breakout price is higher than going down.
Remember that is only a probability. Prices can always go in any direction.
Trading strategy with increasing triangle pattern
The way to trade with the rising triangle pattern is the same as with the isosceles triangle above. However, the probability of price increase in this case is higher. So the difference is that you can enter a larger buy order than the case of isosceles triangle.
You can refer to one of my articles related to probability and trading strategies:
And again remember to read the article: How to trade when prices break out.
Falling triangle pattern
In the descending triangle pattern, the troughs are at the same level as the previous trough, the lower trough is lower than the previous peak. Although the meaning of the word "reduced" in this model represents the lower peaks than the previous peaks. But on the other hand, this pattern is also in a downtrend.
The descending triangle pattern is just the opposite of the rising triangle pattern. So both visually or psychologically and trading strategies you can completely refer to as the case of the rising triangle model above.
Although triangular patterns generally represent a pause and then move on, prices can always move in any direction. The best application of this model is for you to have a good trading plan with pending buy and sell orders to make a profit regardless of the market. But making money on financial markets is not so easy. Again I recommend reading this article: How to trade when prices break out.
Author: Pham Khuong
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