Triangles: consolidating price
A triangle is a consolidation pattern where two lines connecting highs and lows converge. In an ascending triangle, the top is flat and the bottom rises; in a descending triangle, the bottom is flat and the top falls; in a symmetrical triangle, both converge.
In the chart above, you see two converging lines above and below the price: the ‘UPPER’ line passes through the highs, and the ‘LOWER’ line passes through the lows. The color of the lines indicates the trend of the pattern: green is an uptrend, red is a downtrend, and orange is a triangle with an uncertain direction. During playback, the name of the triangle and a brief description appear in the top bar.
Triangles are a picture of indecision. The battle between buyers and sellers continues in an increasingly narrower range with each swing. The type of triangle tells you which side is getting impatient.
In an ascending triangle, the upper line is horizontal: sellers always appear at the same price. But the lower line rises: buyers enter at a higher price each time than the previous one. Buyers are impatient; therefore, an ascending triangle is classically considered to be prone to an upward breakout. A descending triangle is the exact opposite: the bottom is horizontal, the top falls, and sellers sell at a lower price each time. In a symmetrical triangle, both lines converge: both sides are backing down, and the direction is determined by the breakout.
Some triangles, conversely, expand: highs rise, and lows fall. This expanding pattern indicates not consolidation, but increasingly severe volatility, and the breakout is harder to read.
What is important in a triangle is how many times the lines have been touched and where the breakout occurs. Each line must have been tested at least twice. When the price approaches the apex of the triangle, the point where the two lines intersect, the energy of the consolidation decreases; most significant breakouts occur between the middle and the apex of the triangle. Our system also monitors the status of the triangle: you will see it on the card as a breakout, confirmation, retest, or failed breakout.
How to read it
- Read the type of triangle from the slope of the lines: flat top + rising bottom, flat bottom + falling top, or both lines converging.
- Make sure each line has been tested at least twice; a single-touch line is an estimate.
- Confirm the breakout with a close; wicks inside the triangle are not breakouts.
- Place the stop on the other side of the line opposite the breakout direction.
Trap
‘An ascending triangle breaks upward’ is not a rule, but a tendency. Triangles often break in the opposite direction than expected, and the most expensive mistakes arise from this sense of certainty. The second trap is to expect a breakout when the price is stuck at the apex of the triangle: consolidation that reaches the apex often loses its energy, and the price flows without choosing a direction. It is also normal for the price to return to the broken line after a breakout; this retest does not mean that the breakout has failed.
Tip
On the analysis card, next to the triangle, statuses such as ‘broken’, ‘confirmed’, ‘retest’, or ‘failed breakout’ are written. Base your decision on this status, not on the line: an unconfirmed breakout is just an attempt for now.
Glossary
- Ascending triangle
- A triangle with a horizontal top and a rising bottom; indicates that buyers are getting impatient.
- Descending triangle
- A triangle with a horizontal bottom and a falling top; indicates that sellers are getting impatient.
- Symmetrical triangle
- A triangle where both lines converge, and the direction is determined by the breakout.
- Retest
- After a breakout, the price returns to the broken line and tests it again.
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Examine the status of the triangle in an analysis →For information only, not investment advice.