Triangles are technical analysis tools that belong to continuation patterns when trading on the IQ Option platform. A Triangle pattern usually forms along with a trend. It's hard to recognize one unless you draw it. In this guide, you'll learn more about the 3 different triangles. I'll also teach you how to use them in your trading on the Iq option platform.
Contents
What does a triangle pattern indicate?
The triangle pattern is one of the most popular patterns in technical analysis. It owes its popularity mainly to the frequency of its occurrence. It can be found on charts of various assets and in different time frames. Note that like any technical analysis pattern, there must be a trend before the pattern occurs. Most often a triangle pattern heralds the continuation of a trend. However, it may happen that a triangle is a signal of a trend reversal. It all depends on the direction in which the pattern breaks out.
There are 3 different types of triangle patterns: The ascending triangle, the descending triangle, and the symmetrical triangle.
How do you draw a triangle trading pattern?
Drawing a triangle pattern requires you to identify at least 2 highs and 2 lows along with the trend. Connect the 2 highs with a straight line and the 2 lows with a straight line. Extend the two lines until they connect forming a triangle.
As I mentioned before, each triangle must have at least 2 highs and 2 lows connected by 2 lines which intersect at the triangle's apex. The breakout usually occurs after a distance of 2/3 from the start of the triangle to its apex.
Let's have a look at all three triangle patterns.
Three triangle patterns you must know
The symmetrical triangle pattern
This triangle pattern forms in a ranging market. The bulls and bears are undecided on which direction the market should take. If you connect the highs and lows, you'll most likely find that the triangle's angles are almost equal. However, when a breakout occurs, you'll find that a strong trend is adopted. Studies show that most of the time, the breakout occurs in the direction of the existing trend.
So when do you enter into position? Immediately after the breakout occurs, trade along with the new trend.
Symmetrical triangle pattern on 5-minute interval candles for EUR/USD ON the IQ Option platform
Using this image, you can easily enter a sell position that lasts 15 minutes or more.
Ascending triangle chart pattern
This is a bullish triangle pattern that usually forms in an uptrend. The lows are connected by a trendline. However, the highs are connected by a horizontal line (resistance) that touches the highs. View the triangle formation in the image below. When this pattern forms, it's very likely that the uptrend will continue.
So what is the best entry point? Right where the breakout from the resistance level occurs. At this point, you should enter a buy position that lasts 15 minutes or more.
Descending triangle pattern on IQ Option
The descending triangle pattern forms along with a downtrend. To draw it connect the highs of the prices with a trendline. The lows are also connected but this time with a horizontal line forming the support.
The best trade entry point is right where the price breaks the support resuming the downtrend. Here, you should enter a sell position lasting 15 minutes or more.
Is descending triangle bullish or bearish?
Most often, a descending triangle that appears in a downtrend indicates a continuation of that trend. Looking at the psychological shape of a descending triangle we first see a clear support where the price stops. Each subsequent rebound is weaker and indicates the weakness of buyers in the market. Downward breakout is most often dynamic, although there are pullbacks to the line of pierced support, which may become price resistance in the future.
Tips for trading triangle patterns on IQ Option
Triangle patterns are trend continuation patterns. When this pattern forms, it's highly likely that the trend will continue in the same direction. Your main objective is to identify the point where prices will break out and start forming the trend.
The triangle patterns work best when you're working with longer time intervals. That means you should use candles that last 5 minutes or more. Your chart should also cover a longer time frame of 30 minutes or more. This makes it easier to identify these patterns and enter longer trading positions.
Triangle patterns work well with indicators such as the MACD. In most cases, you'll find that once a break out occurs, trading volume increases and the 2 MACD lines separate. This confirms the new trend. Take a look at the forex triangle pattern below.
Descending triangle pattern used alongside MACD indicator
Now that you've learned how to use the three triangle patterns, head over to your IQ Option practice account and try them out. Share your results in the comments section below.
Good luck!