Technical analysis is an integral part of successful forex trading. There are different types of patterns that each forex trader must know and one of them is the triangle pattern. Actually, the triangle pattern has 3 sub-types: the ascending, the descending, and the symmetrical. Today, I’ll talk about the ascending triangle pattern with the hope that you’ll recognize the pattern in the forex charts and know how to trade using the information.
The triangle pattern is widest at the start of the pattern then narrows as the trade goes sideways thereby forming a triangular shape. This pattern simply means that forex traders are losing interest in the foreign currency pair and that demand diminishes as trading goes on. The lower part of the triangle is the support or demand line. The upper part is the supply line and shows the market side which is overbought. Traders take out profits as it continues.
The ascending triangle pattern is a bullish pattern. It is easy to recognize because of its uptrend. The demand line touches the bottom of the rising lows. For it to be considered an ascending triangle, the price of the 2 highs should at least be closer to one another. For new highs to be formed, the trading volume must significantly increase. In general, this pattern takes about a month to form and won’t last for more than 1 ½ months. Forex traders are encouraged to make buy decisions as soon as the price action breaches the triangle’s upper line with increased trading volume.
Seems complicated for you? Actually, there are auto charts services available in the market today. I, for one, am a user of the Alfa Trade auto charts in my forex trading activities. However, it pays to learn about different patterns so that you can validate the auto charts being provided for you.