Triangles

Overview

A triangle is a pattern in which the price range narrows over time, the upper and lower boundaries converging toward a single point. As the chart moves rightward, the distance between highs and lows contracts — quite literally a triangle on the screen.

A triangle is consensus dissolving. During the prior trend, buyers and sellers were clearly divided. From some point on, their forces begin to balance; both sides' claims grow weaker. Range tightens, volume thins, the market holds its breath — and as the apex approaches, one side finally yields.

Three forms exist. The ascending triangle (a flat top, rising lows), the descending triangle (a flat bottom, falling highs), and the symmetrical triangle (both boundaries converging). The outlines look similar, but the psychology inside each differs in subtle ways.

Pattern Structure

How to Read

OANDA:USDJPY

Ascending triangle

• Upper boundary roughly horizontal — the same resistance level tested repeatedly
• Lower boundary a rising line connecting higher lows
• Buyers keep tapping resistance; pullbacks grow shallower over time
• Usually resolves to the upside, and most often appears as a continuation pattern within an uptrend

Descending triangle

• Lower boundary roughly horizontal — the same support level tested repeatedly
• Upper boundary a falling line connecting lower highs
• Sellers keep tapping support; rallies grow shallower over time
• Usually resolves to the downside, as a continuation pattern within a downtrend

Symmetrical triangle

• Falling highs above, rising lows below
• Both boundaries converge at roughly equal angles
• The breakout direction is not predetermined — classified as a continuation pattern, but in practice it is closer to fifty-fifty
• The rule is to follow whichever side breaks

Volume signature

Inside the triangle, volume contracts over time. Price convergence and volume contraction proceed together — this is the signature of a genuine triangle. Then, near the apex, the breakout is accompanied by a sharp expansion in volume. A breakout without volume should not be trusted.

How to Trade It

Entry

1. Draw the upper and lower boundaries through at least two touches each — ideally three
2. Confirm that volume has contracted inside the formation
3. Wait for a clear close-basis break of one boundary
4. Do not chase wick-only breaks — waiting for the retest is the safer approach

Target

Target after breakout = breakout point ± height of the triangle's base

Whether ascending or descending, project the height of the widest part (the base) from the breakout point. It will not always be reached exactly, but it is widely used as the first take-profit reference.

Stop

Place on the opposite side of the broken boundary, or near the centre of the triangle. If price is pushed back inside the triangle, treat the breakout as failed.

Caveats

• Just material before completion: no trading signal exists until the break
• Fake breakouts: wick-only or low-volume breaks often get reeled back on the retest
• Breaks near the apex are weak: participants are exhausted in the late stage
• Symmetrical triangles are direction-undetermined: equally likely to break either way

Related Studies

• Support & Resistance — the triangle's boundaries are concrete support and resistance lines
• Double Top & Bottom — an ascending triangle that fails can morph into a double top
• Dow Theory — the inside of a triangle is the textbook state of "no new highs or lows"