Table of Contents
- What Is an Ascending Triangle?
- What Does the Ascending Triangle Tell You?
- Example of How to Interpret the Ascending Triangle
- The Difference Between an Ascending Triangle and a Descending Triangle
- Limitations of Trading the Ascending Triangle
- Psychology of the Ascending Triangle
- What Is a Continuation Pattern?
- What Are Support and Resistance Levels?
- How Do You Trade the Ascending Triangle Chart Pattern?
- The Bottom Line
What Is an Ascending Triangle?
Let me explain what an ascending triangle is—it's a chart pattern you'll encounter in technical analysis. You form it by drawing a horizontal line along the swing highs and a rising trendline along the swing lows. These lines create a triangle shape. As a trader, you should watch for breakouts from these patterns, which can go up or down.
I consider ascending triangles as continuation patterns because the price usually breaks out in the same direction as the trend before the triangle formed. This makes them tradable, giving you a clear entry point, profit target, and stop-loss level. Compare this to a descending triangle, which is the opposite.
Key Takeaways
- The trendlines of a triangle need to run along at least two swing highs and two swing lows.
- 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—a breakout in any direction is noteworthy.
- 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 stop loss is typically placed just outside the pattern on the opposite side from the breakout.
- 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.
What Does the Ascending Triangle Tell You?
You should view an ascending triangle as a continuation pattern, especially if it appears in an uptrend or downtrend. When the breakout happens, traders like you often buy or sell aggressively based on the direction. Increasing volume confirms the breakout, showing growing interest as price leaves the pattern.
You need at least two swing highs and two swing lows for the trendlines, but more touches make results more reliable. As the trendlines converge, price action coils, potentially leading to a stronger breakout. Volume is stronger in trends than consolidations, so it contracts in the triangle—look for it to rise on breakout to confirm direction. Low volume on breakout signals weakness and possible false breakouts.
For trading, enter when price breaks out: buy on upside, short on downside. Place your stop loss just outside the opposite side. Estimate profit target by adding or subtracting the triangle's thickest height from the breakout point.
Example of How to Interpret the Ascending Triangle
Consider this example: an ascending triangle forms in a downtrend, and price continues lower after breakout, hitting the profit target. You would enter short when price breaks below the lower trendline, with stop loss above the upper trendline.
Wide patterns offer higher risk/reward than narrowing ones, as stop loss is smaller in narrow patterns but profit target uses the widest height.
The Difference Between an Ascending Triangle and a Descending Triangle
Both are continuation patterns, but descending triangles have a horizontal lower line and descending upper trendline—opposite of ascending triangles with rising lower and horizontal upper lines.
Limitations of Trading the Ascending Triangle
The biggest issue with triangles is false breakouts—price might exit then return, or break the wrong way. You may redraw patterns multiple times. Profit targets are estimates; price could exceed or fall short.
Psychology of the Ascending Triangle
Ascending triangles reflect market psychology: buyers push price higher to the horizontal resistance where sellers resist. As price drops, buyers defend at higher lows, forming support. The converging lines build tension, leading to a breakout deciding the direction—up for gains or down for declines.
What Is a Continuation Pattern?
When you spot a continuation pattern, it means the asset's price is likely to continue its prior direction. Ascending triangles are one, along with flags, pennants, and rectangles.
What Are Support and Resistance Levels?
Support and resistance are points where trends pause or reverse—support from demand halting downtrends, resistance from supply stopping uptrends. In ascending triangles, the lower trendline is support, upper is resistance.
How Do You Trade the Ascending Triangle Chart Pattern?
Enter positions on breakouts: buy above resistance, short below support. Use stop loss outside the opposite side. For profit target, add/subtract the triangle's height from the breakout point.
The Bottom Line
An ascending triangle occurs when price moves between a horizontal upper trendline and upward-sloping lower one—it's a continuation pattern breaking in the prior trend's direction. Wait for breakouts to enter, with clear entry, target, and stop-loss levels making it useful for trading.
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