Triangle Chart Patterns

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Triangle Chart Patterns Trading on Mt4
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• Triangle chart patterns are the most traded
  chart pattern in currency trading. There are
  three types of triangles most traded in currency
  trading

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Triangle Chart Patterns
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Triangle Chart Patterns are Easy to Identify on
Forex Charts
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Identifying triangle chart patterns is easy when
a complete technical analysis has been carried
out. Locate 2 higher highs and 2 lower lows.
Next, draw a line through them. Join at least 2
lower lows with one line, and 2 higher highs with
another line, and youll have a nice triangle
chart pattern. You have just identified a
trade-able chart patterns most traded in forex
trading. A minimum of four bounces should be
observed before this triangle formation can be
considered a reliable pattern to trade with.
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Research by Thomas Bulkowski and many famous
technicians indicate that price often breaks out
of the symmetrical triangle ahead of the price at
which the 2 trendlines converge, which is
labelled the apex. From the point where the
triangle begins, research shows that most
triangles break out of either the upper or lower
trendline anywhere from the 66 percent and 75
percent of the way to the apex, though some
triangles break out at the apex.
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An important Caveat on Directional Biases

• There is one major caveat to know when working
  with triangle chart patterns. In most technical
  analysis books, it is found that ascending
  triangles are described as bullish continuation
  patterns and descending triangles are described
  as bearish continuation patterns. From our
  experience, if you classify triangle chart
  patterns as such, you are doing a disservice to
  yourself.

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• Ultimately, we should not try to predict which
  direction price will break from triangle chart
  patterns. Thats not to say that ascending
  triangles cannot meet their upside breakout
  targets or that descending triangles will not
  break to the downside targets. They do.

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• However, when thinking of these triangle chart
  patterns in terms of risk/reward and edge, its
  best to treat them without directional bias and
  take advantage of the principle of range
  expansion following range contraction instead of
  the complexity of trying to predict which
  direction price will break-out.

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• In fact, you will likely find that some of the
  best trades will come from triangle chart
  patterns that break opposite of their expected
  directional bias.
• This is because traders who think that
  ascending triangles will -always break to the
  upside will be forced to sell their forex
  contracts as they stop-out when the ascending
  triangle breaks unexpectedly to the downside, and
  these traders stoping out, when combined with
  sellers entering new short-sale positions as a
  result of the confirmed triangle chart pattern
  entry will create a positive feedback loop that
  propels price to achieve the unexpected downside
  target. Knowing this is a major benefit when
  anticipating where or how to enter a potential
  triangle trade.

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• As such, we should use trendline-break EA found
  on MT4 to draw not just a buy pending order on a
  ascending triangle chart pattern, but also sell a
  pending order on the chart pattern as well.
• When breakout happens either to the upside or
  downside, the trader can participate on the
  breakout regardless of its direction. This
  process of placing buy and sell pending orders on
  triangle chart patterns can now be automated by
  commercialized software or robots.

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• In regard to where are best to enter trades in
  triangle chart patterns, we turn back to
  conservative versus aggressive tactics.
• An aggressive trader would put on a position
  immediately as price begins to break above the
  upper trendline or beneath the lower trendline
  without waiting for further confirmation signal.
• Conservative traders have a variety of entry
  strategies, including entering only as price
  breaks above a strong bullish breakout candle
  like a bullish engulfing or beneath a strong
  bearish candle.

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• Thanks to technology, there are commercial
  robots programmed specially for traders to trade
  triangle chart patterns on automation. Whether
  the trader trades aggressively or conservatively,
  entry based on trendline-breakout or price breaks
  and closes beyond trend line, each of these style
  of trading can be personalized and programmed to
  work in the absence of the trader at the computer
  screen.

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Reducing False Breakouts Trading Triangle Chart
Patterns

• A time filter can be introduced to reduce the
  possibility of false triangle break-outs outside
  the specified trading time frame. Generally, most
  genuine breakouts happen during active Forex
  trading hours and 30 minutes after the opening
  bell of the market session.

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• Another way is to introduce indicators like
  ADX and to factor in the ADX values before
  considering whether to trade breakouts or to fade
  breakouts. Reducing the likelihood of the false
  breakout, I will like to see that the ADX is
  below 15 value for some time.
• And the longer it stays below 15, it will mean
  that market is attempting and preparing for a big
  movement. It will be a very good opportunity to
  trade triangle chart patterns.

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