Trade The Symmetrical Triangles
Saturday, December 29, 2012
Tweet
We will study together one of the most accurate and reliable patterns of the classical methods that has its own powerful forecasting ability.
Besides, we will be involved in studying two important concepts. First, the cyclical plans, which can improve our trading selection and entry timing. The second is an effective exit strategy.
Lots of traders have great knowledge about the price patterns that are repeated as history repeats itself.
But using the technique alone without discipline is not effective all the time, as we know that no system, method or pattern works 100 percent of the time. Depending on this factor mentioned above, the discipline in addition to money management should be added to your knowledge to achieve progress in your trade.
I believe that the disciplined practice of common methods is an interpretation for the word "success" in financial market.
What is a symmetrical triangle and how does it work?
My dear reader, let`s move together to our chosen "Symmetrical triangle pattern" and try to practice it on our charts.
Official Terminology : A classical continuation pattern that confirms the ongoing trend and is formed by at least two lower highs and two higher lows.
The symmetrical triangle qualifies as a continuation pattern after following a strong trend. This triangle is created by two trend lines where each are connected by two points at least. The triangle could extend from three weeks to several months; yet as it extends, the trading range gets narrower and volume diminishes. The confirmation of the breakout will be accompanied by a significant rally in trading volume.
The pattern and the technical target :
Defining the technical objective is explained in the image below for daily chart of Gold.
We will study together one of the most accurate and reliable patterns of the classical methods that has its own powerful forecasting ability.
Besides, we will be involved in studying two important concepts. First, the cyclical plans, which can improve our trading selection and entry timing. The second is an effective exit strategy.
Lots of traders have great knowledge about the price patterns that are repeated as history repeats itself.
But using the technique alone without discipline is not effective all the time, as we know that no system, method or pattern works 100 percent of the time. Depending on this factor mentioned above, the discipline in addition to money management should be added to your knowledge to achieve progress in your trade.
I believe that the disciplined practice of common methods is an interpretation for the word "success" in financial market.
What is a symmetrical triangle and how does it work?
My dear reader, let`s move together to our chosen "Symmetrical triangle pattern" and try to practice it on our charts.
Official Terminology : A classical continuation pattern that confirms the ongoing trend and is formed by at least two lower highs and two higher lows.
The symmetrical triangle qualifies as a continuation pattern after following a strong trend. This triangle is created by two trend lines where each are connected by two points at least. The triangle could extend from three weeks to several months; yet as it extends, the trading range gets narrower and volume diminishes. The confirmation of the breakout will be accompanied by a significant rally in trading volume.
The pattern and the technical target :
Defining the technical objective is explained in the image below for daily chart of Gold.
Notes:
- The pattern has a series of lower highs and higher lows.
- Volume surges at the breakout.
- As the pattern prolongs, the trading range tightens.
The symmetrical triangle trading strategy:
Triangle trading method works the same in all markets and all time frames, but I prefer the daily charts.
It does not only telling you where the prices will go, but also you will not be forced to stay for long in front of your PC, watching the mass of the market.
One condition should be witnessed on the chart in addition to the successful breakout to be capable of defining the entry point.
This condition is; the duration of the construction for the upper line of the triangle, which should consist of more than 28 candlesticks, and the more candles we get the more effective breakout we`ll have.
Is it that simple?
Yes, this method is that simple as you will not be in the market all of the time and believe me, you will be comfortable with that.
There may pass a couple of weeks in which you will not trade until your captured triangle is completed; remember "Staying aside is a position".
Exit points and exit strategies :
In both cases, whether the position was a successful one or not, we should have our discipline as we discussed earlier.
A- When a triangle breakout occurs and you take a position, the stop loss must be placed immediately at the center of the Apex of the pattern as seen on the image below.
B- Now, once you have taken the position and your stop loss has been set, then it worked successfully. In that case, take profit on 1/2 of your selected quantity at the middle point of the previously explained technical target distance, and keep the remaining quantity to the scientific technical objective with moving the stop loss to the entry point.
Try it and send me your feedback.
Ayman Khlifat on Twitter Follow @aymankkhlifat
To contact Ayman Khlifat
Labels:
Education Articles
