In this guide, you will learn how to place trades using the ascending triangle pattern. This is a diversionary trading strategy that has the advantage of spotting pimples first. All you have to do is learn the right trading techniques and you will be able to recognize the real time anatomy of trading pimples.

The cool thing about this chart pattern is that it can be used on a 5-minute chart, a 1-hour chart or any time frame of our choice. It doesn’t matter what your trading style is, whether it’s creeping, operating daytrading, or swing trading. This is the theory behind the supply-demand imbalance that makes price chart patterns work.

Let’s build into it!

Let’s understand how it forms and how we can establish an ascending triangle formation.

 

 

Ascending Triangle Pattern

The ascending triangle formation is a continuation pattern and as the name suggests it has a triangular shape. An ascending triangle is also known as a bullish triangle because it leads to a bullish breakout.

A triangle graphic pattern is usually considered a bullish pattern.

Note *: on the other hand, an ascending triangle is a descending triangle, also known as a descending triangle.

How does an ascending triangle look like:

The first element of this price pattern is an upward slope followed by a flat top.

This shows that the market has tried several times to break the resistance position but could not. Therefore, we have developed a resistance line.

The second element of the ascending triangle is the slanting or increasing trendline moving upwards. This is what makes the price rise pattern.

 

See the chart below:

Remember that all continuation patterns such as bullish flags, rectangle patterns and many more that you can find through our Trading Strategy Trader website, need to have a trend context.

In the case of an ascending bullish triangle, we need to have a previous uptrend to support the breakout. The easiest way to remember is:

  • An ascending triangle develops in an uptrend.
  • An ascending triangle develops in a downtrend.

Now that we have learned how bullish formations are like we want to share with you two things we have learned from bullish triangle trading.

The first little trick we learned is that on a price chart a triangle pattern will rarely have a perfect shape.

Often times you will see a bullish wedge pattern that will break the resistance line but have no real momentum behind the breakout. At other times, the pattern will form a pointed bar that will cause a false breakdown.

All you have to do is wait for the triangle pattern to break through and close above our resistance line. Only then start buying at the opening of the next candle.

If you try to buy every swing high, you can get stuck in a mess when you trade this pattern

Next, we’ll jump into a simple breakout trading strategy that will teach you how to identify and trade an ascending triangle formation.

Ascending Triangle Chart

Now let’s go through some things that will make the triangle pattern easy to understand.

You really have to think in terms of what’s going on behind the scenes. We don’t just like to see prices, but also what market participants are doing.

As the price moves up, it begins to develop a classic higher low. Whatever the reason buyers are getting a little more aggressive with each successive one. Or, we can say that sellers are not too aggressive when the market rotates in an ascending triangle chart pattern.

Either side of that coin, that’s what causes the triangle price formation to develop.

When we reach the peak of the triangle where the price has no place, that’s when we want to expect a breakout.

When a triangle breakout occurs we need to see a draw in volume that will result in a nice long trade.

 

 

The location of the pattern is also important!

If the triangle pattern is within a large trading range, then solid resistance levels may not be as important. However, if an ascending triangle price formation develops in the middle of an uptrend, it will add weight to the pattern.

When an ascending triangle develops in a trend then we will be attracted to buy the breakout.

Ascending Triangle Trading Strategy

The ascending triangle trading strategy is an easy way to catch a retracement in a trend. To confirm the breakout, we will use the RSI tool which is a momentum based indicator.

Because prices usually contract in an ascending triangle pattern, at some point either the bulls or the bears must win. With the RSI indicator in our trading arsenal, we can determine in advance who will win this battle.

How does it work?

Let’s take it step by step:

Step #1: The Ascending Triangle must have Flat Resistance and an Ascending Support Trendline

The two elements of a good triangle pattern are:

  • Flat resistance that he has hit several times. The more a resistance line is tested, the more likely it will eventually fail as a resistance level.
  • The second element is a rising support trendline that connects consecutive lows in an ascending triangle formation.

See below:

Step #2: Apply the 20-period RSI to your Chart

Usually, the price action combines in the formation of an ascending triangle. This means there is a constant battle between the bulls and the bears. Judging who will win this battle can be done by looking at the RSI reading.

Before the breakout comes, we can look at the action in the consolidation to decide whether it’s worth taking the breakout or it’s better to just wait for another trade.

What we want to see is momentum diminishing after each successive test of a flat resistance level. Basically, we look to see the divergence of the bearish price on the RSI indicator.

See the ascending triangle chart below:

Now, before buying the escape, we need to check one more thing.

 

 

Step #3: Check if before the Ascending Triangle we have an uptrend

As a continuation pattern, naturally we need the previous trend. In the case of an ascending triangle, which is a bullish pattern, we need to have a previous uptrend.

If we had a previous uptrend, it indicates that the breakout has a higher probability of happening on the upside.

See the ascending triangle chart below:

The final step is to determine the entry trigger point and to measure our profit target.

See below:

Step #4: Buy as soon as we break the flat resistance level

With the continuation pattern, the best strategy is to buy directly with the breakout. If we wait too long, we will leave some of the profits on the table.

We already have so many meeting factors confirming the escape that it’s pointless to wait for more confirmation. After all, we want to anticipate the escape and get ahead of the crowd.

For the profit taking strategy, we will use our favorite measuring technique. This is a dynamic strategy that is based on real prices and not random numbers.

To find a profit target, simply take the high and low of the ascending triangle formation and add the measurements to the breakout level. This will give you an ideal target for this continuation pattern.

Conclusion – Ascending Triangle Formation

The ascending triangle formation is a very powerful chart pattern that exploits supply and demand imbalances in the market. You can time your trades with this simple pattern and ride the trend if you miss the start of the trend.

Many technical analysts trade the breakout without first taking the time to understand what is happening behind the scene. With an ascending triangle, we can get off to a perfect start, and see trading opportunities before they happen. So, being able to recognize an ascending triangle pattern can be a valuable tool that you can use to identify profitable trades.

Thank you for reading!