How to trade Triangle
Usually, pattern Triangle forming during market consolidation inside a trend and can either indicate the end of the trend or that the trend will continue.
So, you might already know that there are 3 types of triangle in Forex - descending, ascending and symmetrical, I trade all of them the same way, I always place 2 orders - Stop Buy and Stop Sell.
You can use triangle system on almost all popular pairs. I usually use EUR/USD, but if I see a triangle forming on any other pair I would trade it too.
You can look for triangles on any chart but usually I trade minimum 15M chart and maximum 1H chart, triangles are usually more visible on bigger charts.
Here are the System Rules:
1. Identify main trend.
Example here is - downtrend.
2. Wait for market forming 2 tops and 1 bottom or 2 bottoms and 1 top, draw the trend lines.
Example here, bottom 1 inside the trend touches the trend line; top 1 did not reach opposite trend line, bottom 2 formed, so I draw the trend line through the bottoms 1 and 2 and I draw another parallel line through the top 1.
3. Wait for the next top or bottom, draw another trend line. Identify, if the pattern looks like a triangle.
Example here, top 2 formed, so I draw another trend line; it looks like a triangle now.
4. There are always should be 2 tops and 2 bottoms touching triangle borders. Next, wait for formation of top or bottom number 3. After that, usually, market would start to brake through triangle lines. If not it would start braking through during formation of 4th top/bottom. These are in my opinion the strongest triangles compare to those which will start to create 5th or 6th top/bottom
5. Placing the orders:
depends on situation there could be different rules, but usually, I would place Buy stop/ Sell stop 10 pips higher/lower previous top/bottom if the next top/bottom expected to brake. Profit target would be parallel lines of triangle borders, or around main trend lines; usually, I take some profit around 10-20 pips and either move stop loss until market reaches the target or use trailing stop. Stop losses I place at the opposite prices of buy/sell orders (for example - Buy order would be also stop loss for Sell order and the other way around).
Example here - I was waiting for formation of bottom 3, but because bottom 1-2 were around the same level I could already place the order Sell stop from the bottom line of the triangle. After bottom 3 was created and market moved a bit up I placed the order Buy stop, it would have been 10 pips above top 2, but here is difference, because the triangle is so small I had no room so I placed the order 10 pips above little channel which formed slightly below top 2.
1. Careful during major News events:
а. market can start braking around top/bottom 2, in this case I would not continue with triangle system;
б. market can move one direction take us in trade and than change direction without reaching the target.
So, usually if in trade before the news, better to close some positions and move stop in safe place, and try to do the same after news event if you did not open a position before it; if in doubt avoid trading.
Example here - perfect triangle during news event, market moved down, I closed some positions and then strong movement up I closed again some positions, it did not reach the top blue line (my target), so I closed the rest positions around green line - resistant level of triangle from top 1.
2. Market can move outside triangle around it very top where two lines crossing each other and move slowly forming a channel, this usually can happen on 15M chart and during Asian session, or at the closing of the week or at the opening of a new trading week. If that is happening I try to correct lines and see if there is still triangle, if not, I would cancel the system.
3. Pennant is also a triangle, which I trade mostly the same way, except usually pennants are very small and there are no strong tops and bottoms in them, so I would look for a channel inside the pennant and place the orders as usual. Also pennant similar to a flag, so usually it forms after very strong and sharp movement, so the profit target could be the length of that previous movement.
Usually pennant is a strong signal for trend to continue, like on the example below,
but never be sure 100% in anything in Forex, after pennant, market can also turn around, like in the example below, this is why I mostly all the time place 2 orders.
Some other examples of triangles:
That is all for now, if you have any questions, please leave comments I'll try to respond ASAP.
All my articles:
1. How I use Fibonacci Retracemnet
Comments / Комментарии
I would inform hopefully soon how you can get it, it is not for sale though.
I want to ask if you're interested in a partnership
Using this systems , I indetify triangle pattern and on 2015.12.22 09.59 (GMT +2), I placed buystop on EURUSD at 1.09202, SL 1.08991, TP 1.09302(10 pips). TP hits and price continue move up. if I watched the market, I can move my SL (trailing stop and move TP higher) and can get 50 pips. But its ok.
and today also there was triangle breakout around 1 GMT (before london open)
It proves that triangle systems is working.
Many Thanks for sharing the systems and Looking forward to see your latest live trading video using this systems.
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