Breakout Triangle Strategy โ Break Out of the Fold By Trading Triangles
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Ever wonder how to trade triangle patterns that form on your charts? Or maybe you have seen the same pattern over and over and didnโt even know they were called โtriangle patterns.โ Trading triangles can be a simple, yet effective strategy for making quick profits in the markets.
In this breakout triangle strategy, you will learn key price action analyses like triangle pattern technical analysis, triangle shape pattern, descending triangle chart pattern, ascending triangle chart pattern, and much much more!
Breakout Triangle Strategy โ Win More Trades by Trading Triangles
Trading Triangles in forex, stocks, options and futures form on all time frames and take very little effort to spot.
Here is what a triangle pattern looks like:
What is basically happening is the buyers and sellers are evenly pulling against each other. Basically, there is no clear trend forming and thus it will keep squeezing smaller and smaller following the trend lines.
Think of it as a tug-of-war that is going on between the buyers and sellers.
As the two lines get closer and closer together it is quite evident that something will have to give. Whoever wins the battle will be who you want to grab a ride with by entering a buy or a sell. Also, read about the Forex Mentors and the best investment you can make.
Different Patterns for Trading Triangles
1. Symmetrical Triangle: The price will bunch up and converge together. ย You will see lower highs and higher lows. Here is an example:
2. Ascending Triangle:ย There is resistance at the top and higher lows that form at the bottom. Like this:
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3. Descending Triangle: These triangles are similar to an ascending triangle, however, they are the opposite of them. So what you will see support at the bottom and lower highs at the top. Like This:
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Now that you know what to look for letโs go ahead and dive into our strategy for trading triangles.
Before we do that here are some important things to keep in mind.
- This strategy can be traded on any time frame
- Any market
- No indicators are required. Just lines that you draw and price action.
Rules for Breakout Triangle Strategy
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Rule #1: In Breakoutย Trading: Find a forming Triangle (ascending descending, or symmetrical)
If you are having trouble with this concept simple look at the examples above for clarification. This is the critical part to this strategy. Find out where the price action is bouncing off of. Is it support? resistance? Look at the price action and determine what is happening.
So there is a lot going here in the picture above. Do you see the three arrows pointing to resistance on the horizontal line on the top? Or the higher lows at the bottom? This is a great triangle and one that I would trade every time if it would meet all of the rules of this strategy.
This triangle has already formed but what does it look like before it gets there?
Check this out:
Now when this happens:
You will draw the bottom line at this area to draw you a triangle, and in this case, it will be an ascending triangle. The reason why I drew this line here is that the price seemed to hit this area and โbouncedโย right off of it and went back into the triangle The Symmetrical, Ascending, and Descending triangle patterns can all be used with this strategy. I just want you to know that they come in different shapes and sizes ๐
Rule #2 ย Of the Breakout Triangle Strategy: Wait for a Break of the Triangle Pattern
Now all you need to do is get your popcorn out and wait for a break of the triangle that you drew. If itโs on a daily time frame it may be a week before you see this. If itโs an hourly timeframe, it may not break until the next day.
Whatโs important is that it breaks. If you go back in your charts and draw some of these you will find that when this break occurs more often than not the break happens fast and it is usually very powerful. Which is why you need to learn how to draw these on your charts so you can cash in on those pips!
Once you see a breakout above the triangle, it will always be a BUY
If it breaks out below the triangle, it will be a SELL.
This example broke out above the triangle so that we will be looking for a BUY trade.
If you are unsure if it broke above or below, DONโT TRADE IT!
Rule #3 of this Breakout Trading System: Let Price Settle than Enterย trade
Once you see that it broke your triangle that you drew you can technically go ahead and trade at that position. This method would be for more advanced traders who also consider the current price action and what the volatility of the market is. There is a bigger risk trading this way, but I could pay off if you are identifying the correct price action and the market does what it is supposed to do.
Make sure to check out this article on the best breakout trading strategy!
So in our example, which is a GBPUSD (1 hour chart) currency pair, I bumped down to a lower time frame (15-minute) to enter this trade.
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Some strategies Iย like staying in the current time frame, but this one, in particular, I know that once this triangle is broken, there is a possibility of a huge move up or down!! The earlier you get in the better!
Exit/ Stop Loss
When you start to see the price consolidating than that would a great place to exit the trade:
As you can see, that is what happened here so we would exit this trade for a +89 pip winner.
Place your stop loss anywhere between 30-60 pips from your entry. This can be adjusted depending on what time frame you are trading. From a 1-hour to daily time frame 30-60 pip stop is ideal. For any time frame below that, consider a 10-30 pip stop loss.
Conclusionย
Thanks for reading the breakout triangle strategy! Be sure to check out some of our other strategies. If you enjoyed this one then maybe price action is your specialty. Here is our price action pin bar strategy. Trading triangles are generally pretty easy. Finding a good break of the triangle can usually end up give you a decent profit. ย Let us know what you think of this strategy on trading triangles.
Thank you for reading!
Please leave a comment below if you have any questions about Breakout Triangle Strategy!
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This strategy is the best to beat the market. Price action respects triangle break outs.
Nothing better than a breakout ????
The triangles make trading easier compared to thousands of other indicators.
From far away, thank you for your efforts
Glad you enjoyed it!
Easy to understand and use.
Glad you enjoyed it!
Very usefull and profitable
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