Tips & Strategies - Trading Triangles - Part 4
by 4XChick
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Hello readers,
Today we are going to discover the power of Triangle Chart Patterns. Triangles can be a bit tricky and confusing as they can be either a continuation or reversal pattern. It is recommended that beginner traders take caution when trading triangle breakouts. Many times the triangle pattern will have a quick breakout on one direction that may be false, then quickly rebound and breakout in the opposite direction. This pattern will be covered more in depth in the chart pattern webinars run by Serene Investor.
Triangles come in several different types; ascending, descending, symmetrical and expanding. Metastock can find these chart patterns for you, however, it is always best to be able to see them yourselves.
In the chart above I have drawn in the descending triangle for you so that we can look at the other factors within this pattern. Can you all see how the triangle is squeezing together? Once we have determined that price has formed this triangle, we would look to see if it will break above or below the area of support or resistance.
Whilst the pattern is forming here, can you see how the MADC indicator starts to weaken off and move upwards towards the mid line? They way I look at this is that the volume of the movement is minimal, exactly what I want in this pattern. Once price breaks the formation, MACD starts to accelerate in a downwards direction again, once again showing me that the trend is downward biased. Not only do I have this confirmation, but RSI did not manage to break above the 50% mid line, rather bounced off it and headed back down. With this confirmation as well as the breakout candle closing below the support line, it was a entry point to sell short. And of course you can take into account that the moving averages have crossed in a downward direction. You see traders, it is about putting probability in your favour and using all the tools and resources that fit your strategy.
I hope that you have enjoyed todays lesson and look forward to any feedback, comments, questions and requests. Please email me at 4xchic@sereneinvestor.com.
Happy trading….
Tags: breakouts, currency, forex, MACD, Moving Averages, RSI, Triangle patterns