In this article, you’re going to learn how to spot and trade an Ascending Triangle in the most optimal way.
This post will help you cut losses, put Stop-Loss in the right place, and take your profit at the right time.
After you finish reading this article your way of trading Ascending Triangles will improve significantly.
Let’s dive in.
What is an Ascending Triangle?
An Ascending Triangle (aka Rising or Right Angled Triangle) is a bullish continuation or reversal chart pattern after which the price usually starts to go in the upward direction.
When a Right Angled Triangle appears in an uptrend it behaves as a continuation pattern, a scenario in which the price consolidates for a period of time before continuing higher in the previous direction.
This pattern could also form at the end of a prolonged downtrend when the price meets very strong support, consolidates for a period of time, and then breaks out in the upward direction.
An Ascending Triangle consists of an Upper Flat Resistance Line and a Lower Rising Trendline (which acts as a Dynamic Support Line).
The Upper Flat Resistance Line is formed by a series of price candles with almost the same highest price level and the Rising Trendline is formed by a series of higher lows.
Both these two trendlines converge at the end of the formation of the pattern.
To spot an Ascending Triangle in a chart draw a trendline along with the Swing Highs, you will get a Flat Trendline and upon connecting the Swing Lows, you will get a Rising Trendline.
Voila! You’ve just found an Ascending Triangle.
How to Trade and Take a Position in an Ascending Triangle
Trading and Taking a position in an Ascending Triangle is quite straight and simple.
Method #1: On the Breakout
The best way of opening a position is after the price breaks out through the horizontal trendline.
However, the trading volume should increase right after the breakout. If it doesn’t increase then the breakout will probably be failed and should be traded with caution.
You can also wait for the next candle to open above the resistance before going LONG. The best thing is that It’ll give you the opportunity of Volume Confirmation (the amount of volume with the breakout candle) before opening a new trade.
Method #2: Before the Breakout
An anticipatory or aggressive way of trading a Right Angled Triangle is to take an entry when the price touches the Lower Rising Trendline (Support Trendline).
This is an early position-taking and doesn’t guarantee a breakout to the upside since the position is taken before the completion of the pattern.
An Ascending Triangle is not completed before it breaks out to the upside or downside.
However, if you take a position on the Lower Rising Bull Trendline it gives you the opportunity of making more profit if the trade goes in your favor.
But do keep in mind that although it carries more rewards, it also carries a bigger risk of having a losing position.
BONUS: Trading Ascending Triangle as a Reversal Pattern
Apart from trading an Ascending Triangle as a continuation pattern in a trending market, it can also be tradable as a Bottoming Formation at the end of a downtrend.
See the following schematic to see how the price action looks visually.
The thing is:
An Ascending Triangle always gives a bullish signal irrespective of the location it appears.
The methods of trading a Rising Triangle that appears at the bottom are exactly the same, there is no difference.
You can use either method (Method #1 or #2) according to your preference and trading style.
Where to Put the Stop-Loss?
Put the Stop-Loss either below the breakout candle or below the base of the triangle.
If you are taking a position at the Rising Trendline before a breakout, consider placing your Stop-Loss below the last swing low.
It’s that simple.
How to Measure the Price Target of an Ascending Triangle?
To measure the technical target of an Ascending Triangle take the height of the pattern from the widest part of the Rising Trendline (the very first candle that is touching it) to the Flat Resistance Trendline and then place the bar on the Flat Trendline.
Bam! You got the technically logical target of the Ascending Triangle.
How Do You Trade Ascending Triangles?