Trading with Triangles

Trading with Triangles
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Triangles are continuation patterns formed by the convergence of two trend lines that define areas of support and resistance of the price action. There are three types of triangle patterns. What happens to the price action when these triangles form, and how does a trader use the triangle continuation patterns in binary options trading?

Ascending triangles

In an ascending triangle, the candlesticks make progressively higher lows while maintaining about the same candle highs, signifying the gradual waning of selling pressure. Two lines drawn over the price highs and lows will show a horizontal resistance and a gradually ascending line of support which rises to meet the horizontal resistance to form the ascending triangle.

The expected result is as follows:

  • A bullish break of horizontal resistance
  • Prices expected to move higher
  • Prices not expected to move lower

Trading strategy: On the standard binary options platforms, place an UP trade when the market price is at the ascending lower trend line. On the One Touch platform, use a price barrier that is located from 10 to 40 pips above the horizontal resistance boundary line of the ascending triangle.

Descending triangles

A descending triangle is formed by progressively lower highs pushing towards static lows, signifying a gradual waning of buying pressure. Two lines drawn over the price lows and highs will show a gradually falling resistance, pushing lower to meet the horizontal support to form the boundaries of the descending triangle.

The expected result is as follows:

  • A bearish breakout and prices expected to move lower
  • Prices not expected to move higher

Trading strategy: On the standard binary options platforms, place a DOWN trade when the market price is at the descending upper trend line.

Symmetrical triangles

A symmetrical triangle is formed by progressively lower highs and higher lows, indicating that there is indecision between buyers and sellers. So we have a falling line converging with a rising line to form the boundaries of a symmetrical triangle.

The expected result is as follows:

  • Price could move higher or lower, depending on which sentiment eventually prevails.

Trading strategy: In binary options trading, trading the symmetrical triangle is tricky as the price can breakout either way. However, the price action will bounce off both the resistance and support lines in succession before the price will breakout either to the upside or downside as the price approaches the point of convergence. The safest trade will be to use either the support or resistance boundaries of the triangle as “Touch” points while the price is far from convergence.

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