A continuation pattern formed by converging trendlines, categorized as ascending, descending, or symmetrical.
Deep Dive
Triangle patterns form when price consolidates between converging trendlines, creating a coiling effect before a breakout. There are three main types: ascending triangles (flat top, rising bottom - bullish), descending triangles (flat bottom, falling top - bearish), and symmetrical triangles (both lines converging - neutral).
Triangles represent a battle between buyers and sellers that compresses into an increasingly narrow range. As the pattern progresses, volatility decreases and a breakout becomes imminent. The breakout direction typically follows the prior trend (continuation), but triangles can also act as reversal patterns.
Triangle breakouts are most reliable when they occur in the first 2/3 of the pattern (before the apex). Breakouts too close to the apex often lack momentum. Volume should decline during formation and spike on the breakout. The measured move target is the widest part of the triangle projected from the breakout point.
Why It Matters
Triangles indicate consolidation before continuation, offering breakout trading opportunities.
Related Terms
- Breakout — A price movement through a defined support or resistance level with increased volume, signaling potential trend continuation.
- Trend — The general direction in which the price of an asset is moving. Trends can be upward (bullish), downward (bearish), or sideways (ranging).
- Consolidation — A period of sideways price movement where price trades within a defined range, often preceding a breakout.
- Flag Pattern — A continuation pattern that looks like a small rectangle sloping against the prevailing trend after a sharp move.