The Triangle chart pattern has proved to be one of the most commonly used day trading patterns. They are generally used when trading stocks and provide in-depth analytic insights in volatility decrease as well as current market conditions. This fact ensures multiple trading opportunities that make the triangle pattern very flexible when it is only forming or completed.
Traders will have to work with three different forms of the triangle pattern. In this article, we will discuss how they help to develop anticipation or breakout strategies that mainly suit day trading strategies. If you are able to understand how they work, you will have a chance to manage risks and minimize losses.
Reasons to Use Triangle Chart Patterns
As we have already mentioned, the triangle pattern is a very important tool in defining the current market condition. What's more, traders will have an opportunity to:
- Observe the volatility decrease;
- Chances for the volatility to expand in the nearest future;
- Generate analytic insights in reference to the current market conditions;
- Use different types of forthcoming condition indicators.
Now, let's see how the pattern works and how you can use it during your day trading.
How Triangle Chart Pattern Works
As a rule, the triangle chart depicts the price that enters a tighter range within a given timeframe. In other words, we have a chance to visually observe the battle between bears and bulls in real-time.
The pattern refers to the continuation type. It means that the price will keep moving in the direction of the trend even when the pattern is completed. What's more, traders should consider that the price was moving before the pattern has been formed.
To form a triangle pattern, it is supposed to make at least 5 touches of the support and resistance. For instance, it may go as follows:
- 2 touches of the support line;
- 3 touches of the resistance line.
The situation may turn vice versa. Whatever happens, make sure the triangle pattern touches the support and resistance in not less than 5 points.