Triangle Trading Pattern For High Probability Trend Trades

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Triangle Trading Pattern Strategy
Triangle Trading Pattern Strategy

The Triangle Trading Pattern that many traders look for are large patterns with lower highs and higher lows. Today, however, you’re going to learn a smaller triangle trading pattern that occurs within a trend.

Trading this type of triangle is a great way to find an excellent spot to enter a trend. This provides you with an opportunity to enter a trend trading setup with very little risk because of the narrow range of the triangle pattern on the chart (whether you’re trading stocks, futures, Forex or E-minis).

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VIDEO TRANSCRIPTION

When people usually look at a Triangle Trading Pattern, they’re looking at lower highs and then higher lows for a medium sized or pretty big pattern. This will be a symmetrical triangle pattern.

There are two other types of triangles:

  • A descending triangle chart pattern which has a lower high and an equal low.
  • An ascending triangle chart pattern which has a higher low and an equal high.

These large triangle trading patterns are okay, but I don’t personally trade them very much. I’ll show you the triangle trading strategy that works out very well for me.

THE TRIANGLE TRADING PATTERN THAT WORKS BEST FOR ME

What I like to look for are triangles in these little retracement spots. Little retracement there, that’s where I want to see a triangle. This functions as a nice triangle breakout indicator. I call these “Trending Triangles.”

BTW, this works as a Forex triangle pattern indicator, but also for the stock market, futures and E-minis as well.

The first thing is the overall trend is down. We are in a fairly good down move and that’s the first thing that we’re looking for and we’re going to trade in the direction of that trend. This moving average is the 50 period simple moving average by the way.

OTHER TYPES OF TECHNICAL ANALYSIS TREND RETRACE PATTERNS

There’s a little move up, a higher low, higher high, complex retrace, a, b, c complex retrace right there. Sometimes I’ll take that short. Depends on other things. But what I prefer even better than those are these triangle retraces. A little triangle trading pattern within the retrace. So here you go, there is your lower high, and here’s your higher low, and there’s your triangle.

We’re going to take it short but the dynamic of what’s happening here and the energy of the market is that again the overall dominant direction of the market is down and we had a pretty darn strong move here. What happens when you get strong moves like this often is that people are hesitant to take the market short, because they feel they’re late to the party now.

This is mass psychology as to what causes these patterns on the charts is that people hesitate and they say, you know what, we already missed out on this big move or people were in on the move and they are taking their profits, and so they are actually getting out.

Maybe they put in a stop above the high of this bar or something. And so on the market retraces back up a bit. And you have a lot of volatility coming down. That’s also important. The market goes through a cycle of being highly volatile and then going into low volatility.

CYCLES OF VOLATILITY AND TRIANGLE TRADES

Those of you who are familiar with Bollinger bands, you understand this concept. Bollinger bands will expand and then contract. You go on a little Bollinger bands squeeze. And that is a constant fluctuation in volatility of market. That’s a cycle. Another type of cycle in the market.

Here we had a higher high volatile time in the market and then volatility comes out well. If you can catch it at the end of that low volatility cycle, then you will usually get a pretty good impulse move out of that pattern, in this case it’s a triangle trading pattern. And that’s why I like trading triangles is because the market will often explode out of them and make some, you know pretty decent money in a short period of time. So a risk on this trade is from there to there.

THE TRIANGLE TRADING STRATEGY PROVIDES AN EXCELLENT RISK-TO-REWARD RATIO

The potential reward that the move gave us was all the way from there to there. So that’s better than 2 to 1, better than 3 to 1. And that’s how you have to look at it. Not so much the pennies over here.

A triangle trading pattern is a contraction pattern. It shows you when the market is going to low volatility and we like to get in at the end of them back in the direction of trend for another explosive move or at least explosive for a great risk-to-reward ratio.

What did you think of this tutorial trading multiple Forex time frames?
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Also I am giving away one of my favorite chart patterns that works today. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.

Those interested in the triangle trading pattern also showed in interest in this video:
http://www.topdogtrading.com/head-and-shoulders-chart-pattern-that-really-works/

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