This is the third part of patterns and sixth lesson of trading series. In this post we will be learning about triangles pattern and flags. Both patterns are widely used by traders and are highly successful.

Triangle

Triangle pattern is a consolidation pattern. Consolidation means price is stable for some time after a big move in any direction.

Triangle patterns are of 3 types. Ascending triangle, descending triangle and symmetrical triangle. Ascending triangle is generally bullish, descending triangle is mostly bearish and symmetrical triangle is neutral pattern.

But this triangle patterns depends upon previous trends and mostly signifies continuation of move. For example, if there is strong up trend and we spot ascending triangle, it is very strong signal we will continue up. A symmetrical triangle in uptrend also signifies continuation of uptrend and descending triangle during uptrend signifies there might be a trend reversal and we must be careful while trading.

Similar pattern is valid for downtrend.

How triangles work?
Let me give you example of ascending triangle during up trend. Example, there is a strong uptrend and now we need consolidation before next move. Then we can see formation of ascending triangle. In ascending triangle, bear strength to push price down will be decreasing and bulls strength remains constant, which signifies bulls are stronger.

Flags

There are 2 types of flag. Bull flag and bear flag. Bull flag is when price is going up strongly and price starts going down slowly as shown in picture above. It signifies bulls are strong and bears are not able to push the price down. Same is for bear flag but in opposite direction.

Trading course series - #1 - Introduction

Trading course series - #2 - Risk management

Trading course series - #3 - Risk reward ratio

Trading course series - #4 - Patterns(1)

Trading course series - #5 - Patterns(2)