Forex Trend Continuation: The Triangle Patterns

The triangle continuation patterns resemble pennants, but don't have poles. Forex technical analysis distinguishes four types of triangles:

• Symmetrical
• Ascending
• Descending
• Expanding (also known as broadening)

Symmetrical Triangle Continuation Pattern

The symmetrical and converging descending resistance line and ascending support line form the symmetrical triangle. It is framed by at least four significant points. A balance between supply and demand on the forex market is implied by the symmetrically converging resistance and support lines. The currency price bounces between them until a break on one of the sides occurs.

Under the conditions of a downward, bearish trend, traders should look for a break below the rising support line, whereas under bullish trend conditions, the focus should be on the break above the declining resistance line. However, in order to qualify this formation as a continuation pattern, a break in the same direction of the preceding trend should occur. Otherwise, the pattern will signal the forming of a new trend.

The ambivalence of the forex market is implied by the decrease in the trading volume as the end of the triangle is reached. However, an increase in volume accompanies the breakout.

Ascending Triangle Bullish Pattern

The ascending triangle formation is a bullish pattern, which indicates that the preceding upward price movement is headed even higher upon completion. This triangle pattern implies that the demand is larger than the supply.

Two trendlines form the ascending triangle pattern: a flat resistance line and an ascending support line. Forex market traders can expect that the currency price will break on the upside, above the level of resistance. This is the point when the pattern is considered complete. If, however, the price falls below the support line, the pattern is broken.

Descending Triangle Bearish Pattern

The descending triangle formation is a bearish pattern, indicating that the preceding downward price movement is headed lower upon completion. By analogy with the ascending triangle, the descending triangle pattern is considered to be a trend continuation pattern when it is preceded by a downward trend; however, it can be found in an uptrend. Under this triangle pattern it is assumed that the demand is less than the supply.

This chart pattern is formed by a flat support line and a descending resistance line. Additionally, forex market traders look for a currency break on the downside and resuming of the bearish trend.

Even though trading volume decreases toward the tip of the triangle, starting from the breakout it steeply increases.

Expanding Triangle Continuation Pattern

This type of triangle pattern is also known as the Megaphone. Two divergent trendlines form the triangle and its tip is right next to the original trend. Volume increases with the development of the chart formation.

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