Continuation Technical Pattern – the Ascending Triangle

I. What is the Ascending Triangle?

After the price rises for a period of time, it is stopped at a certain price level and falls back. While soon after it falls, it encounters a rise in buying, and then the price falls again at the last high level. Before it reaches the last low, it encounters strong buying, which drives the price up, and then falls back down again at the level of the last high.

This is repeated, forming a right triangle with the upper border horizontal and the lower border sloping upward as shown in the figure below:

II. How to identify the Ascending Triangle?

1. It generally appears in an uptrend, and a few appear in and downtrend.

2. The high point of each rise is basically on a horizontal line, while the low point of the fall is gradually rising. Connecting the highs and lows, respectively, to form a right triangle whose upper trendline is flat.

3. The volume gradually shrinks along the direction of the tip of the triangle overall.

III. Technical meaning of the Ascending Triangle

It is called an Ascending Triangle because most of the prices break out of the pattern upwards, indicating that the market will continue to rise in the future.

The Ascending Triangle has increasingly higher low every time it falls, which is a signal of strong multiparty force, so the probability of an upward breakthrough in the market is higher. When the price breaks through the upper trendline, it is in line with the Dow Theory’s definition of an uptrend: the back low is higher than the previous low, and the back high is higher than the previous high. So the Ascending Triangle mostly indicates that the market continues to be bullish.

IV. The application of the Ascending Triangle Pattern

Through the above study, we know that the Ascending Triangle is a bullish signal, now let’s move to the introduction of the entry signal in real trading.

1. when the price breaks through the upper trendline of the Ascending Triangle and closes with a solid positive line, which is the buy signal 1 as shown in the following figure:

1. when the price breaks through the upper trendline of the Ascending Triangle, and back to break through the previous high again, which is the buy signal 2 as shown in the following figure:

1. If the price falls below the lower trendline of the Ascending Triangle, it is a signal to leave the market as shown in the following figure:

V. Example of real trading

The above chart is the Gate.io futures BTC/USDT 4-hour chart, from 2020-11-5 to 11-12. BTC rose from $13,500 to about $15,800, and then experience a continuation, forming the Ascending Triangle pattern. After the price broke through the upper trendline of $16,000, it indicates a strong upward market.

VI. Summary

Ascending Triangle continuation pattern is widely and frequently used in real trading, which coincides with the Dow Theory which believes that the market trend is changing. In addition to standard patterns, irregular patterns also have a higher probability of applying in trading, which needs to be used flexibly in real trading.

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Disclaimer

This is for your reference only. The information provided by Gate.io above is not investment advice and is not responsible for any investment you may make. The information regarding technical analysis, market judgments, trading tips, and trader sharing may involve potential risks, investment variables, and uncertainties, and this issue does not provide or imply any opportunity for guaranteed returns.