How To Trade Triangle Pattern?
A forex trader must master many analysis techniques and strategies to trade successfully. Studying chart pattern is one of the most common practices in Forex trading. These charts give reliable entry and exit points for the potential trade. Out of many kinds of charts, one of the most common patterns followed by the majority of traders is triangle pattern. It is liked and preferred by many as it is not only indicates good trade with low risk and high rewards, but also gives clear indications about the price objectives.
There are three types of triangle patterns commonly followed by the traders. Let’s discuss them one by one.
1. Symmetrical triangle pattern:
The first pattern is commonly known as the symmetrical triangle pattern. This kind of triangle pattern is result of the intersection of two trend lines of slopes similar to each other. The point of intersection of the trend lines is called the Apex. Usually in a symmetrical triangle, the rising trend line intersects with the down trend line. In case of a symmetrical triangle pattern, sellers cannot push the price of the currency lower and the buyers are unable to take the prices higher. Now all that happens is the coiling of the price between support and resistance which is termed “consolidation” in trading language. Due to consolidation, breakout is most likely to occur within the first 2/3 part of the triangle. This breakout is either above the trend line resistance or below the trend line support. As a result of which, either the buyers or the sellers take control over the trading day.
Once the traders recognize a symmetrical triangle pattern on the chart, all they must do is wait for the breakout to occur. After the breakout, a stop is placed approximately 10 pips below the last swing low in the chart. Traders usually place the limit equivalent to the height of the triangle.
2. Ascending triangle pattern:
Another triangle pattern commonly seen on the charts of the forex market is the ascending triangle pattern. It is very easy to recognize and traders do not need to emancipate a lot before recognizing an ascending triangle pattern. An ascending triangle pattern is formed when the rising trend line intersects with a flat resistance line on the chart. Traders often regard it as a bullish pattern in the Forex market. This triangle pattern is often regarded as a breakout above resistance level on completion. However, it is not mandatory and breakout can take place below the resistance pattern too in case the trend before the triangle formation was a down trend. In short, the trader should not get excited seeing a rising trend as resistance may be too strong for the buyer to push the prices higher and breakout may occur below the resistance line. In most cases, when an ascending triangle pattern is formed, buyers win the battle defeating the resistance but in case the buyers loose the battle, it can easily be seen that drop in price is equivalent to the height of the triangle.
3. Descending triangle pattern:
The last triangle formation in triangle trading patterns is the descending triangle pattern. It is contrary to the ascending triangle pattern as in the descending pattern a down trend line intersects with a flat yet solid support line. On recognition of such a pattern by the chartist, they wait and expect a further down trend line. This triangle pattern is usually confirmed by a breakout below the area of support or close below the area of support. This breakout is a signal for the traders to short their position and put a stop loss above the top of the triangle pattern. In such a triangle pattern, sellers have a stronger position compared to buyers. In the majority of cases, price of the currency breaks the support line to move further downwards, but in some cases, if the support line is too strong to be broken, the price of the currency can bounce back and reach new highs. It will then become a lost battle for the sellers. Usually, investors place the orders above the triangle top and set a target equivalent to height of the triangle pattern formation with aim of generating decent profits.
Triangle pattern trading can be a very good tool for the trader. Once you know how to read triangle patterns on the chart or you get an expert to read the patterns for you, it becomes quite simple and convenient to judge the movement of the currency. It not only helps you judge the movement of the currency, but also where to place the order, how much risk has to be taken, and how much profit can be expected from the trade.
Many candlestick traders don’t fully realize that every candlestick tells a story about the market. That is certainly the case with the often overlooked high wave signal. In this addition to my free price action trading course, I’m going to show you how you should be trading the high wave candlestick pattern. This candlestick formation, like the spinning top and doji formations, shows indecision in the market; therefore, you wouldn’t take the high wave candlestick as an entry signal, but it can be a good indicator that the market may be changing direction. You often find multiple high wave candlesticks at the top or bottom of trends that are changing direction. Note: I have not found pure naked candlestick trading to be profitable in my own personal experience, although I know of traders that do well with these techniques. I have, however, found that using candlestick signals with a reliable trading system, that has proven to be profitable on its own, can be a powerful combination. What is a High Wave Candlestick Pattern? As I mentioned earlier, the high wave candle is similar to a spinning top or doji – as it signals indecision. The idea is that, over the course of the given time period, the bulls and the bears both tried to move the market, but neither was able to hold onto their gains by the end of the period. Like a spinning top, a high wave candlestick pattern has a relatively small real body. The difference is that a spinning top has relatively small upper and lower wicks, whereas a high wave candlestick has relatively long upper and lower wicks, revealing more volatility. In the image above, you can see a doji, a spinning top, and a high wave candlestick. Spinning tops and high wave candlesticks can have either bullish or bearish real bodies. The real body of a high wave can be larger than the real body of a spinning top, but should be relatively small when compared to its total range (the distance between its high and low). You may see high wave Japanese candlesticks forming in various places on your charts – including consolidating (low-range, sideways) markets. In order to be of any use, like the doji and spinning top, the high wave signal must come after an uptrend or a downtrend. Used in this way, it could signal a possible change in direction. At the very least, it should alert you to the possibility of stronger, more reliable, reversal signals upcoming. Trading the High Wave Candlestick Pattern In the image below, you will see a series of high wave candlestick patterns. The first occurred after a small retrace in the overall trend, which is not typically where this signal would be useful. However, as you can see, its occurrence after a relatively large bearish candle signaled indecision in the market. It was followed by an inverted hammer (which is a weak bullish signal), and then the trend continued upward. The second occurrence, in the image above, is a more useful example of trading the high wave candlestick pattern. It appeared after an extended uptrend, signalling that the market was unsure about continuing the uptrend. That signal was followed by a bearish engulfing candlestick that engulfed the previous 2 candlesticks. The trend reversed from that point. The third high wave signal appeared shortly after the previous bearish engulfing pattern. This signaled more indecision, but ultimately the trend continued its reversal. Notice: At the top of the trend above, we have a high wave candle, followed by an engulfing candle, followed by a spinning top (or a formation very similar to one), followed by another high wave candle, followed by a doji, and then finally another engulfing pattern, before continuing the bearish reversal of the trend. All of these candlesticks are telling a story. The last high wave candlestick in the image above came after a downtrend, signalling indecision. It was followed by an engulfing candlestick, forming a bullish engulfing pattern (although not a very good one). The result was another reversal (at least in the short-term). Below are some examples of how you could use the high wave candlestick pattern in your own trading: Example #1: You’re watching an uptrend, waiting for a reversal signal. You see a high wave candle. This lets you know that there is indecision in the market, and you should be on the lookout for an upcoming strong reversal signal, e.g., shooting star, bearish engulfing pattern, evening star, etc…. The high wave candle also strengthens the idea that price will reverse in the area of your strong reversal signal. Example #2: You’re in a existing trade. You’re near your take profit. The market seems to have lost its momentum, and then you see a high wave candlestick form. You notice that this stall in price is also happening near a significant support/resistance zone. You decide to close your trade, keeping your profits, rather than risking a sharp reversal; or perhaps you just move your stop loss to break even. Exmaple #3: You decide to scale into a trade, starting with a small position. At first, price action is going your way, but then you notice a series of indecision signals, e.g., high wave candles, spinning tops, dojis, etc…. You decide to hold off adding to your position until the market shows you more evidence that it will continue in the direction of your trade. Final Thoughts: As I always say, candlestick trading is great for predicting short-term changes in market direction; however, nothing works 100% of the time in trading, and even strong reversal signals that work out can’t guarantee that the reversal will continue in your favor. That being said, you shouldn’t be trading the high wave candlestick pattern as an entry signal, but it can add to the case for taking a strong reversal signal. You often see multiple high wave signals at the absolute tops and bottoms of large trends, which can be powerful with the right trading system. Like all the other candlestick signals that we have discussed in my price action course, the context in which these signals occur is very important. If you see a high wave candlestick during a period of price consolidation, it’s obviously signalling market indecision, but so is the low-volatility, consolidating market. However, these signals can be valuable when they occur during trends, especially strong or extended trends. Steve Nison recommends using candlestick signals with western technical indicators to find and qualify the best trades. I like to combine candlestick signals with another profitable trading system that works well with candlesticks, like the Infinite Prosperity system. The high wave candlestick is a simple indecision signal – not powerful on its own, but it can help to make a strong case for taking other, stronger candlestick signals. Hopefully, this article will help you get started trading the high wave candlestick pattern.
The stock market goes through cycles of up trends, down trends, and range bound price action. This is caused by equities as an asset class going through phases of accumulation and distribution. Bull markets are where the easy dollars are made. You can buy the best growth stocks as they break out of price bases to new all time highs and trend higher and higher after each great earnings report. You can buy a stock and just let it go higher for weeks and months, easy peasy. This is where the old ‘let your profits run” axiom works: in trends. The bulk of my stock market trading profits were made with the right stocks in a bull market. It only takes a couple of leading stocks to make you great market beating returns. Early in the strongest bull markets you don’t have to do much, you are just holding winners and being happy. Bull markets have ascending vertical support levels: primarily moving averages. You don’t get stopped out though because end of day support holds as your stocks make higher highs and higher lows. In a range bound market you have to do some work, you have to start buying dips and selling strength. There are horizontal support and resistance levels. You can buy fear and sell greed and make money. You have to start working at it though earning the money now requires entry and exit decisions. In a down trend, correction, or bear market the party is over. You can actually lose money rather easily. Buying dips loses money as lows get lower. Doing nothing loses money as prices fall. Waiting too long to get out loses money because you miss the rally. Selling short as prices fall and riding the trend down is usually not as easy as buying and riding an up trend because downtrends tend to be filled with rallies and volatility. Bull markets contain the easy dollars this is where you have to maximize your ability to ride a trend. Range bound markets can be profitable if you can buy the dip and sell the rip. This is where you have to earn your dimes through active trading. For most people the key is to not lose much money in a bear market. Selling early at the first sign of trouble can save a lot of hard earned bull market profits. I have avoided the biggest stock market downtrends since 2008 because there is so many warning signs before a plunge. This has saved me from major drawdowns and the mental and financial pain of losses. Down trends are where you are picking up pennies in front of a steamroller. Day traders and some swing traders can make some money in down trends but remember that for most that is not where the real money is made.
hiiam trading with some range pairs eurchf,eurgbp,usdjpy with one strategy ofcourse it is scalping.my trades are mixed with others while trading with this strategy.strategy iswe attach indicatorsbollinger bandenvelopewe use time m15logic=when price [up]exceeds both upper bb and upper envelope we short.when price[down]exceeds both lower bb and lower envelope we longstoploss 25take profit 8.with this sl and tp for three days i have 16 wins out of 18.i traded eurchf ,eurgbp,usd jpy[the loosing trades went wrong side maximum 100 pips and retraced almost 50%]and i observed last 2 years charts.i noticed that with stoploss 35 take profit 12 there is almost 80% winning.this is without martingale.-------------------------------------------when we make some martingale for losing trades almost all failure trades survive with in 200 pips range.i noticed if we use martingale as follows0.1 first ordergap 15 pips =150.1 lotgap 25 pips =400.1 lotgap 40 pips =800.2 lotgap 80 pips =1600.4 lotlock all orders at 220pips =220release all at extrreme level[use rsi,we can make it by manual also]stoploss 40 ,tp breaeven+30 pips