《How to Trade Triangle Patterns》.doc

How to Trade Triangle Patterns Triangles can be traded by entering a position when the support or resistance line is broken and a stop-loss can be placed outside the opposite side of the formation. Depending on the type of triangle present, it can have certain tendencies that may aid traders in predicting the ultimate breakout direction. When a breakout does occur, the pattern provides an entry point and stop loss for the trade.?How far the breakout pattern is likely to go can be estimated by using a profit target, attained by taking a measurement from the triangle.? Using triangles in this way can provide valuable insight and an effective technical analysis tool to the trader.?Indicators such as volume can also add further insight when trading these patterns. Triangle Tendencies As discussed in the other sections, while triangles are called continuation pattern it does not mean the appearance of a triangle pattern always indicates a continuation of the current trend. Triangles can also cause reversals. Certain triangles do have general tendencies though when seen in the context of a broader trend. Symmetric triangles are neutral. A breakout could occur to the upside or downside. Buyers and sellers are exhibiting similar strength as the price action continually narrows towards the apex of the triangle. (Trading breakouts is unprofitable for most novice traders; consider some alternatives.) Ascending triangles provide a slight bias for an upside breakout when the formation appears during an uptrend. The higher lows (ascending support line) indicate increasing buying pressure (or decreasing selling pressure) which may eventually overcome the strong resistance at the top of the pattern (horizontal resistance line). Descending triangles provide a slight bias for a downside breakout when the pattern occurs during a downtrend. The lower lows (descending line) indicate selling pressure (or decreasing buying pressure) which may eventually overcome the strong support at the