Date  02.12.2023   |  Get in Touch

Triangle Breakout Strategy

Triangle breakout strategy is a popular technical analysis method used by traders to predict price movements in the financial markets. A triangle pattern occurs when the price of an asset creates a series of higher lows and lower highs, forming a triangle shape. The triangle is created by connecting the upper and lower trend lines, creating a convergence point. The convergence point is a critical price level that traders use to determine whether to enter or exit a trade. In this article, we will discuss the triangle breakout strategy and provide two sample trades to illustrate its application.

Triangle Breakout Strategy

The triangle breakout strategy is based on the premise that when the price of an asset breaks out of the triangle pattern, it will continue in the direction of the breakout. The breakout can occur in either direction, indicating a bullish or bearish trend.

There are two types of triangle patterns: the symmetrical triangle and the ascending/descending triangle. A symmetrical triangle occurs when the upper and lower trend lines converge at an equal angle. An ascending triangle occurs when the upper trend line is flat, while the lower trend line slopes upward. A descending triangle occurs when the lower trend line is flat, while the upper trend line slopes downward.

To use the triangle breakout strategy, traders wait for the price to break out of the triangle pattern. The breakout occurs when the price crosses either the upper or lower trend line. When the breakout occurs, traders enter a long or short position, depending on the direction of the breakout. Traders place a stop-loss order below the breakout point to limit their losses if the trade goes against them.

Symmetrical Triangle Breakout

Let us consider an example of a symmetrical triangle breakout in the EUR/USD currency pair H4 timeframe period. The chart below shows the symmetrical triangle pattern in the EUR/USD pair.

EURUSD

The EUR/USD pair has been forming a symmetrical triangle pattern, with the upper and lower trend lines converging at an equal angle. Traders wait for the price to break out of the pattern to enter a trade.  When falled after faulse BO and retesting support line it’s pressurised again to Break Out that triangle.

On May 20 – 27 last year, the price broke out of the pattern, crossing the upper trend line. Traders entered a long position at 1.0950 and placed a stop-loss order at 1.0850. The price continued to rise, and traders exited the trade at 1.1380, generating a profit of 430 pips. The trend did not stop on resistance 1,140 and got higher if you look at chart history. Formed BO triangle again and price reached 1,18490.

Ascending Triangle Breakout

Now let’s consider an example of an ascending triangle breakout in the Apple Inc. (AAPL) stock. The chart below shows the ascending triangle pattern in the AAPL stock.

Breakout-Triangle

The AAPL stock has been forming an ascending triangle pattern, with the upper trend line flat and the lower trend line sloping upward. Traders wait for the price to break out of the pattern to enter a trade.

On February 22, 2023, the price broke out of the pattern, crossing the upper trend line. Traders entered a long position at $148,30 and placed a stop-loss order at $148 on 5 Min Chart. The price continued to rise, and traders exited the trade at $149.50, generating a profit of $1,60 per share with position size 500 shrs trader got 800$ on a table.

Conclusion

The triangle breakout strategy is a popular technical analysis method used by traders to predict price movements in the financial markets. Traders wait for the price to break out of the triangle pattern and enter a trade in the direction of the breakout. Traders place a stop-loss order below the breakout point to limit their losses if the trade goes against them. The strategy works well in both bullish and bearish.

Trader

Ten years on market. Brokers:  HUGO'S WAY , RoboForex, Binance. Tools: Forex, Crypto.

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