Simple Patterns Tutorial Part 1. Ascending Triangles
Updated
Hey Traders, I am going to do a short free tutorial on Simple Patterns. This tutorial's purpose is to show you:
-How to Identify Ascending Triangles
-How to measure the move to project price targets
-Examples of how you can create a rules based Strategy around Simple Patterns.
- Psychology behind Ascending Triangles
The Ascending Triangle is a Bullish Pattern and should be traded with the trend! There are a couple things that you should consider if you decide to create a strategy based around these Patterns:
1) I have found that these Patterns are not very successful if you are using them for countertrend trades. I'm sure someone out there has a strategy that consists of these patterns to signal a counter trend trade however it personally did not work for me. I found that these Patterns are extremely accurate when you are trading with the trend and couple them with a pullback or specific candle formation after the breakout has occurred.
2) Volume should increase when price breaks out of the Ascending Triangle formation
3) These Patterns will not always be picture perfect therefore we need to look for the characteristics of the Pattern as opposed to perfect lines. The characteristics being, relatively equal highs creating a near horizontal Resistance line, and higher lows creating a rising (Ascending) Support line.
4) These Patterns tend to complete within 3/4 of the way to the APEX. I have found that these Pattern tend to be invalidated if price trades to far into the APEX.
Psychology behind an Ascending Triangle:
The top line of the Ascending Triangle (Resistance) is a price level where the sellers are able to overcome the buyers and push price down. As this pattern continues to form, you will notice that the sellers are unable to push price as low this time and this is where the Ascending Trend line begins to form. As this pattern continues, again the sellers are unable to push price as low as the most previous low and the buyers are beginning to overpower the sellers. The Psychology aspect is that every time the sellers push price down, the buyers are willing to pay a higher price for there shares (this creates the Ascending Triangle). Eventually, the buyers will pay a high enough price to overcome the sellers and break through the upper Ascending Triangle line (Resistance).
I hope this was helpful! I cannot possibly cover every aspect of every pattern so please feel free to message me or comment below with any questions you may have! I will be happy to help! Thanks Traders, make sure you do your due diligence and back test any strategy or pattern that you are attempting to create. You will also need conditions, criteria, and rules for that strategy. This will save you a lot of money and give you confidence in your trades. I have attached a live example of an Ascending Triangle below and I will periodically be posting more examples like that one as an update to this tutorial.
-How to Identify Ascending Triangles
-How to measure the move to project price targets
-Examples of how you can create a rules based Strategy around Simple Patterns.
- Psychology behind Ascending Triangles
The Ascending Triangle is a Bullish Pattern and should be traded with the trend! There are a couple things that you should consider if you decide to create a strategy based around these Patterns:
1) I have found that these Patterns are not very successful if you are using them for countertrend trades. I'm sure someone out there has a strategy that consists of these patterns to signal a counter trend trade however it personally did not work for me. I found that these Patterns are extremely accurate when you are trading with the trend and couple them with a pullback or specific candle formation after the breakout has occurred.
2) Volume should increase when price breaks out of the Ascending Triangle formation
3) These Patterns will not always be picture perfect therefore we need to look for the characteristics of the Pattern as opposed to perfect lines. The characteristics being, relatively equal highs creating a near horizontal Resistance line, and higher lows creating a rising (Ascending) Support line.
4) These Patterns tend to complete within 3/4 of the way to the APEX. I have found that these Pattern tend to be invalidated if price trades to far into the APEX.
Psychology behind an Ascending Triangle:
The top line of the Ascending Triangle (Resistance) is a price level where the sellers are able to overcome the buyers and push price down. As this pattern continues to form, you will notice that the sellers are unable to push price as low this time and this is where the Ascending Trend line begins to form. As this pattern continues, again the sellers are unable to push price as low as the most previous low and the buyers are beginning to overpower the sellers. The Psychology aspect is that every time the sellers push price down, the buyers are willing to pay a higher price for there shares (this creates the Ascending Triangle). Eventually, the buyers will pay a high enough price to overcome the sellers and break through the upper Ascending Triangle line (Resistance).
I hope this was helpful! I cannot possibly cover every aspect of every pattern so please feel free to message me or comment below with any questions you may have! I will be happy to help! Thanks Traders, make sure you do your due diligence and back test any strategy or pattern that you are attempting to create. You will also need conditions, criteria, and rules for that strategy. This will save you a lot of money and give you confidence in your trades. I have attached a live example of an Ascending Triangle below and I will periodically be posting more examples like that one as an update to this tutorial.
Note
Here is another real example of an Ascending Triangle Pattern. This Pattern formed on the 60 minute Gold chart. As you can see from the chart below, there were two false breakouts while this pattern was forming and this is a good example to show how important it is to have specific conditions & criteria for entry. For example, one of my conditions for trading simple patterns is that price must break out on heavy volume followed by a retest of the top trend line as support (you can see an example of that on the chart above). I also labeled where conventional targets for the Ascending Triangle Pattern would be on the chart below however, I always recommend that every trader does there own back-testing to determine where stops and targets should be. This is a current example of an Ascending triangle. If you would like to practice spotting these patterns, head over to the Gold chart and see if you can spot it. I will continue to update this tutorial with real examples of Ascending Triangles. You can find these patterns all over the place but my objective is to share the ones that I believe are educational. I hope this was helpful! Please feel free to ask any questions you may have and if there is a specific pattern or topic you would like me to do a tutorial on, comment or message me your request. I will be sure to add it to the list of future tutorials! Thanks Traders!Note
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.