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The optimal time to trade the forex foreign exchange market is when it's at its most active levels. That's when trading spreads the differences between bid prices and ask prices tend to narrow. In those situations, less money goes to the market makers facilitating currency trades, which leaves more money for the traders to pocket personally. Forex traders need to commit their hours to memory, with particular attention paid to the hours when two exchanges overlap. When more than one exchange is open at the same time, this increases trading volume and adds volatility—the extent and rate at which forex market schedule or currency prices change. The volatility can benefit forex traders. This may seem paradoxical.

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Triangles forex volumes

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The development of the descending triangle takes the same amount of time as the ascending triangle, and volume again plays an important role in the breakout to the downside. Some analysts believe that increased volume is not all that important. We, however, believe it to be paramount. We always consider the strength or weakness of volume as being the "straw that stirs the drink. So far, we have seen two triangle patterns: one from an uptrend and bullish market move and one from a downtrend with a decidedly bearish look.

Symmetrical triangles, on the other hand, are thought of as continuation patterns developed in markets that are, for the most part, aimless in direction. The market seems listless in its direction. The supply and demand , therefore, seem to be one and the same. During this period of indecision, the highs and the lows seem to come together at the point of the triangle with virtually no significant volume. Investors just don't know what position to take.

The breakout generally occurs in the direction of the existing trend. But, if you are looking for an entry point following a symmetrical triangle, jump into the fray at the breakout point. These patterns, the symmetrical triangles as well as those on the bullish and bearish side, are known to experience early breakouts that give investors a "head fake.

Experts tend to look for a one-day closing price above the trendline in a bullish pattern and below the trendline in a bearish chart pattern. Remember, look for volume at the breakout and confirm your entry signal with a closing price outside the trendline. Technical Analysis Basic Education. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. Ascending Triangle Pattern. Descending Triangle Pattern. Symmetrical Patterns.

The Bottom Line. Key Takeaways In technical analysis, a triangle is a continuation pattern on a chart that forms a triangle-like shape. Triangles are similar to wedges and pennants and can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure. There are three potential triangle variations that can develop as price action carves out a holding pattern, namely ascending, descending, and symmetrical triangles.

Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. If the price breaks out on low volume, that is a warning sign that the breakout lacks strength.

This could mean the price will move back into the pattern. This is called a false breakout. For trading purposes, an entry is typically taken when the price breaks out. A stop loss is placed just outside the opposite side of the pattern. For example, if a long trade is taken on an upside breakout, a stop loss is placed just below the lower trendline. A profit target can be estimated based on the height of the triangle added or subtracted from the breakout price.

The thickest part of the triangle is used. Here an ascending triangle forms during a downtrend, and the price continues lower following the breakout. Once the breakout occurred, the profit target was attained. The short entry or sell signal occurred when the price broke below the lower trendline.

A stop loss could be placed just above the upper trendline. As a pattern narrows, the stop loss becomes smaller since the distance to the breakout point is smaller, yet the profit target is still based on the largest part of the pattern. These two types of triangles are both continuation patterns, except they have a different look. The descending triangle has a horizontal lower line, while the upper trendline is descending.

This is the opposite of the ascending triangle, which has a rising lower trendline and a horizontal upper trendline. The main problem with triangles, and chart patterns in general, is the potential for false breakouts. The price may move out of the pattern only to move back into it, or the price may even proceed to break out the other side. A pattern may need to be redrawn several times as the price edges past the trendlines but fails to generate any momentum in the breakout direction.

While ascending triangles provide a profit target, that target is just an estimate. The price may far exceed that target, or fail to reach it. Ramlall, Indranarain. Emerald Group Publishing Limited, Bulkowski, T. Trading Strategy Guides. Technical Analysis Basic Education. Trading Skills. Company News. Your Money. Personal Finance. Your Practice. Popular Courses. What Is an Ascending Triangle?

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.

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The middle step price consolidating in between two black lines is what the ascending triangle is. This is where the energy compounds before the breakout occurs. The key idea behind the ascending triangle is that the chances of the bullish continuation are higher than the reversal.

There are no hints or signals that the market is about to reverse as the consolidation phase is only used for the dominant market force to take a breathe and regroup. Despite the brief corrections, the buyers are still in full control of the price action. This is where the most significant advantage of the ascending triangle lies. The breakout that ends the consolidation phase generates a signal that the dominant market side is ready to continue in the same direction.

A breakout like the one below helps us clearly define the trading setup with an entry, stop loss, and take profit. However, no single chart formation is perfect. The false breakout may prompt us to enter the trade before the market makes a U-turn and reverses. Therefore, it is suggested to consult other available technical indicators before entering the market.

Descending triangles are bearish chart formations that occur during a mid-trend. In essence, their shape and design very similar to that of the ascending triangles, except for the fact that descending triangles are bearish formations. In this case, the lower trend line is the one that supports the price action as the upper trend line increases the pressure with each new lower high.

Ultimately, the pressure is too big to handle and the break of the support takes place to activate the descending triangle pattern. On the left side of the illustration, you see the downtrend in place, which is interrupted by the first bounce from the horizontal support the first green line. Each subsequent rebound is weaker, as the dominant side — the sellers — turns up the heat. The descending triangle shares the same advantages and limitations of the ascending one. In essence, this chart formation helps traders to define the risk and return to the trading setup.

This is done with the help of a breakout and the lower supporting line. On the other hand, some descending triangles end up being reversals after the failure of sellers to extend the downtrend. Unlike the prior two versions of triangles, the symmetrical triangle consists of two converging trend lines.

Neither of these is flat, which makes the symmetrical triangle both a neutral and continuation chart pattern. The likelihood of a trend continuing in the same direction as before the triangle was created is very high. The symmetrical triangle can be initiated by both an uptrend and a downtrend. During the second phase, the price action consolidates between the two converging lines, while the market makes a series of higher lows and lower highs.

Finding a perfectly symmetrical triangle is impossible as either one of the two lines is usually mildly bent. This type of triangle has two versions: bullish and bearish. The former is initiated by the uptrend and ends in the continuation of the overall trend. The latter starts with a downtrend and ends with a break to the downside.

In these two cases, a symmetrical triangle is a continuation pattern. It has the same function as the ascending and descending triangles: it helps prevailing trends to continue. If the symmetrical triangle is initiated by the sideways price action, with no clear directional bias, the triangle is then a neutral chart pattern. The chances of a break higher or lower are around Triangles share a similar shape with wedges and pennants. You must ask yourself how does one tell the difference between these three.

There are two critical differences between these two chart patterns. First, wedges are reversal patterns. The consolidation phase is a tool to reverse the trend direction, not to extend it. A rising wedge is a bearish chart formation, while the falling wedge is a bullish pattern. Secondly, as you can see from the illustration below, wedges have no flat trend lines.

In a rising wedge, both are slightly pointing towards the upside. When it comes to pennants, the differences are harder to spot. As you can see from the illustration below, pennants are symmetrical triangles. The critical difference is in the duration of the consolidation phase. With pennants, the length is rather short, unlike the symmetrical triangles that can last much longer.

Moreover, pennants are preceded by a flag pole the initial trend. This is a mandatory element of this chart formation. On the flip side, the symmetrical triangle is centered on the consolidation phase. At this point, there are two options as to where they enter the market.

A trader can consider entering the market as soon as the breakout candle closes outside of the triangle. In other words, when the breakout is confirmed. On the other hand, the latter is perfect from the risk management perspective. However, the throwback the retest may never take place. As outlined earlier, the ascending triangle consists of two trend lines, where the upper is flat, and the lower is shooting higher.

The consolidation phase then occurs with the resistance trend line nearly flat, while the supporting line is connecting the higher lows. Therefore, the break signals that the buyers have forced an end to the consolidation phase and the market is ready to move higher again. Ultimately, the market presents us with both options for the entry as the throwback took place.

The middle green line signals an entry, while the lower horizontal line, located inside the triangle, generates a level for stop loss, in case the market reverses and ends in a failed breakout. By measuring the distance when the triangle was first formatted, we calculate the take profit level. Finally, the market hits our take profit order and we collect our profits. Ultimately, the risk-reward stands at Descending triangles capture the consolidation phase in a mid-trend.

The triangle was preceded by the downtrend as the sellers took a step back to consolidate recent gains. The upper line is forcing the price action to go towards the supporting line, therefore squeezing the space between two lines. The break of the lower line generates a signal that the consolidation has ended. Unlike in the previous example, the second option of entry was never presented to us.

Hence, you could have only traded this scenario if you had chosen option number one. An entry was placed at the level where the breakout candle closed with the take profit measured to reflect the distance between two lines at the beginning of a triangle. The price creates lower bottoms and even lower tops.

In this manner, the two sides of the triangle are descending and contract to a tight point. Opposite to the rising wedge, the falling wedge has a strong bullish character. Therefore, the trigger side of the falling wedge formation is the upper line. When the price breaks the upper level of a falling wedge, you should aim at for a bullish move at least as large as your wedge formation.

As such, traders use the falling wedge to set long entry points on the chart. Below you will see a sketch of a falling wedge:. Now that you know what the rising and the falling wedges look like, we should share one more detail regarding these formations. Wedges could have trend continuation, or trend reversal character.

When the wedge appears after an extended price move, we expect a reversal of the trend, when the wedge appears earlier in the trend, we expect it to be a temporary retracement that will continue the main trend in place. Typically the more powerful wedge formation is the potential trend reversal formation which occurs after a prolonged trend move. The symmetrical triangle is a situation on the chart where the tops of the price action are lower and the bottoms are higher.

Also, the two sides of the triangle are inclined with the same angle. This creates the symmetrical character of the triangle. Typically with a symmetrical triangle pattern, the expected directional breakout is unknown. The reason for this is that the bullish and the bearish move have equal strength as seen thru the price action. When a breakout eventually occurs, it is likely to provoke a price move equal to the size of the pattern. Therefore, you should carefully identify a potential breakout in the upper and the lower level of the symmetrical triangle in order to take the right position in the market.

The sketch below illustrates the symmetrical triangle formation and possible breakout scenarios :. As you see from the example above, the potential target is based on the size of the triangle formation. With this type of measured move analysis, you will know what to expect from the symmetrical triangle breakout, whether it breaks upwards, or downwards.

Pennants on the chart have a similar shape to that of symmetrical triangles. They typically appear during trends and have a trend continuation character. The bullish pennant is similar to a symmetrical triangle in appearance, but the Bullish pennant formation comes after a price increase.

Since pennants have trend continuation character, the bullish pennant is likely to continue the bullish trend on the chart. When the upper side of the pennant gets broken upwards, we are likely to see an increase equal to at least the size of the pennant, and typically larger. And so when trading pennants, a second target should also be used to catch a larger move. When calculating the second target, you would analyze the price leg immediately following the pennant.

You could set the target to of the previous leg or. When the trend seems strong and has a steep slope a measured move would be an appropriate second target, and in all other cases the. See that here we have two targets. The red target is the first one, which is as big as the size of the pennant. The green target corresponds to the size of the previous up move, which should be applied starting from the upper side of the pennant.

As you have probably guessed, the bearish pennant is the mirror image of the bullish pennant. Bearish pennants start with a price decrease and end up with a symmetrical triangle appearance. Since pennants have trend continuing character, bearish pennants are likely to continue the bearish trend.

When the price goes through the lower level of the bearish pennant, you should first look to capture the first target, which is equal to the size of the pennant itself. When the price completes this target, you can then try to catch the expected further decrease, which is equal to the size of the previous leg or. Refer to the image below for a Bearish Pennant:. You can hardly mistake an expanding triangle on the chart.

The reason for this is that it has very unique parameters. Both sides of the expanding triangle are inclined, but in opposite directions. The direction of the potential price move of this chart pattern is very tricky to determine. Therefore, we will now introduce a few rules, which will help you to identify the direction of the expected price move.

If the expanding triangle is a horizontal mirror image of a symmetrical triangle, then you should trade the formation as a trend continuation pattern. The image below shows a sketch of an expanding triangle with symmetrical lines:.

If the two sides of the expanding triangle are increasing, then the pattern is likely to have bearish character. If the two sides of the expanding triangle formation are decreasing, then the figure is likely to have bullish potential. If the tops of the price action are increasing, but the bottoms are decreasing with higher intensity, then the pattern has bearish character.

On the contrary, if the bottoms are decreasing, but the tops are increasing with higher intensity, then the pattern is likely to have bullish character. In other words, you should trade in the direction of the side, which has higher inclination. Now that we have discussed most of the important triangle patterns in Forex, I will now show you how a triangle trading system could work. The chart illustrates five triangle examples and their potential outcome. The chart starts with a big symmetrical triangle.

The price creates three decreasing tops and three increasing bottoms on the chart. The red arrow in the beginning of the triangle measures its size. As you see, the same red arrow is applied when the price breaks the upper level of the triangle.

The red arrow indicates the potential target of the pattern, which gets completed after a week. Meanwhile, on the way up the price action creates a rising wedge chart pattern. As we discussed, the rising wedge has bearish potential. With the the breakout through the lower level of the wedge we notice a minor correction. At the end of the bullish tendency the price creates another symmetrical triangle.

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Triangle Chart Pattern Technical Analysis [100% profit]

The Triangle pattern in forex trading is a time-sensitive chart pattern that shows a tightening range due to market indecisiveness. Triangles are similar to wedges and pennants and can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure. A triangle is a type of consolidation, and therefore volume tends to contract during an ascending triangle. As mentioned, traders look for volume to increase on.