Ascending and descending triangles

Hi Samir, 

Thanks for the question. 

The ascending triangle is a bullish chart formation. It is made out of two trend lines with the upper trend line being flat while the lower trend line is forcing the price action higher. Therefore, the price action is creating a series of the higher lows, which is a characteristic of the bullish price movements.

As with other triangles, the break of the price action above the resistance trend line activates the pattern. This way, the ascending triangle comes in the middle, with an uptrend preceding the triangle and resuming after the triangle is broken.

On the other hand, the descending triangles are bearish chart patterns that take place during a mid-trend. They look very similar to an ascending triangle, with the difference being that the descending triangle is a bearish chart formation. In this case, the lower trend line is flat while the upper line pushes the price action lower. Before two trend lines converge, the break out occurs and activates the pattern. 

Both patterns are extremely powerful continuation chart formations. The idea behind these two triangles is that chances of the continuation are higher than the reversal. This equips traders with a trading setup to play with. The break of the resistance/support line activates the pattern and provides traders with stop loss, take profit and entry. Therefore, the triangle is a classic “ride the trend” strategy. 

The biggest weakness of these triangles is the possibility of a false breakout. This happens when the market breaks above/below the trend line and then reverses its course to trade in the opposite direction. Traders are faked to enter the market, get on the wrong side by believing that the market is about to extend the overall trend, however, the reversal stops them out. This is why it is important to set a stop loss inside the triangle and limit potential losses if the market fakes us out.