How to use the triangle pattern more effectively

As with many other patterns or technical analysis indicators, the triangle pattern is best used in conjunction with other indicators. Moving averages allow you to determine the presence of a pronounced trend and support and resistance levels, below/above which you should place protective stop-loss orders. Moreover, if the instrument price moves at a fairly large distance from the moving average within a 200-day period, it may indicate the strength of the long-term trend.

The Relative Strength Index (RSI) can be used to indicate if an instrument is overbought or oversold: if overbought, a breakout of resistance is unlikely and if oversold, a breakout of support is unlikely. At the same time, an oversold condition increases the chances of breaking through resistance and an overbought condition increases the chances of breaking through support.

The volume indicator can also be used to make a decision about entering the market. The volume growth when the price oscillations near resistance or support fade increase the chances of its breakthrough, but it can hardly be called a reliable indicator as the volume growth can be connected with the increase of selling interest when resistance is reached or of buying interest when support is reached.

Conclusion

Although many shapes and patterns of technical analysis in recent years are not familiar, to put it mildly, compared to how it was 10-15-20 years ago, the pattern of the triangle, both rising and falling and symmetrical, is still found nowadays, so a trader should not exclude it from his trading practice.

Unfortunately, due to the existing probability after the formation of any of these triangles, especially after the formation of a symmetric one, the trend reversal cannot be called extremely reliable.

In addition, each breakout of one of the sides can turn out to be a false break, and it is challenging, if not impossible, to predict it. The use of supporting signals and indicators can increase the chances of success, but they do not give a 100% guarantee either.

There can also be situations when the price does break through a level, passes most of the predicted distance, and at some point turns around and returns to the range, takes down a stop-loss order, and again moves in the direction the trader wants.

Nevertheless, as the trader improves his skills he will be able to predict the movements after the consolidations with higher probability and earn on it. Even after having mastered enough trading techniques using the triangle pattern, one should not disregard other figures of technical analysis, fundamental factors, and Intermarket analysis.

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