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Triangle Trading
| Classic triangle patterns don't fit
easily into simple continuation or reversal trading strategies.
Depending on their unique characteristics and position within
the larger trend, they may foretell either event. While certain
variations lean toward a favored breakout, the artistic
symmetrical triangle has zero bias to either outcome as
the formation suggests a state of perfect balance. Sharp traders
closely watch the tug and pull within the developing pattern to
identify the eventual winning play.
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Trading power within well-formed
triangles intensifies as they shift from range into breakout
mode. When price finally surges into directional
trend, a powerful vertical thrust quickly develops. While false
moves occur at these apex points, triangles have a higher degree
of reliability than most breakouts.
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| The angle of inclination defines
this pattern's identity. Ascending triangles
rise again and again toward a ceiling resistance level.
Symmetrical triangles surge rhythmically across both
sides of a horizontal axis dividing the formation right through
the middle. The bearish descending triangle
bounces weakly off bottom support.
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High volatility marks the birth of
new triangles. But as they approach their termination
points, activity decreases sharply. This highlights a major risk
in successfully trading these patterns. Should no ignition spark
the expected breakout, the chart may flat-line, with price
meandering endlessly in sideways motion. Traders caught in this
phenomenon are advised to close positions and move to more
fruitful endeavors.
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Ascending
Triangles - Buying pressure builds as price bounces
repeatedly off a ceiling of horizontal resistance. A
sharp thrust through this zone signals the breakout.
Watch for any failure at the 3rd high, triggering a
possible triple top reversal. |
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Symmetrical
Triangles - Noted for their central pivot axis,
these patterns can yield powerful moves. Take no initial
bias and examine buying at the 2nd and 3rd bottoms. The
ability to hold well above the 1st low on good
accumulation stokes the breakout fires. |
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Descending
Triangles - Rally power fades as the bull's energy
is spent. An illusory double bottom invites one last
batch of weak hands just before a sharp break signals
major selling. If the bears fail, buy the 1st move above
the trendline of the declining tops. |
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