• Skip to primary navigation
  • Skip to content
  • Skip to footer
StoneX®

Trade Futures, Spreads and Options with Confidence.

Top Navigation

  • Open a Futures Account
  • Sign Up
  • Log in
  • 1.800.800.3840

Primary Navigation Menu

  • About
    • Who We Are
    • Services
    • Risk Disclosure
    • COVID-19
  • Trade
    • Broker-Assisted
    • Self-Directed / Online
    • Request Pricing
  • Hedge
    • Ag Marketing Plan
    • WASDE Analysis
    • Grain Resources
    • Livestock / Dairy Resources
    • Request Pricing
  • Invest
    • Automated Strategies
    • Managed Futures
    • Request Pricing
  • Advisories
    • GENERAL / FUNDAMENTAL
      • DT Newsletter
      • Insider Market Advisory
      • Turner’s Take Newsletter & Podcast
    • TECHNICAL ANALYSIS
      • The Cullen Outlook
      • Data Feed Trade
      • Jarboe Trading Journal
      • Trade Spotlight
    • AG MARKETING
      • Cattleman’s Advisory
      • Technical Ag Knowledge
      • Turner’s Take Ag Marketing
    • THIRD-PARTY RESOURCES
      • CFRN
      • Moore Research Center, Inc. (MRCI)
      • OptionWorks®
      • TASMarketProfile.com
  • Education
    • CME Group Resource Center
    • CME Group Offers
    • Small Exchange Resources
    • Guides
    • Frequently Asked Questions
    • Order Entry Handbook
  • Blog
    • Futures 101
    • Ag Marketing
    • Tips & Strategies
    • Trading Advisories
  • Resources
    • Trading Software
    • Quotes and Charts
    • Futures Calendars
    • Contract Specifications
    • Margin Requirements
    • Futures Calculator
  • Accounts
    • Apply
    • Access My Account
    • Funding
  • Contact
 

Price Pattern Basics: Triangle Formations

July 13, 2011 by Nick Metzger| Tips & Strategies

Over the last century, traders and technicians have studied the markets looking for patterns that will help them better forecast the market’s next move. Over time, traders have found chart patterns and formations that have proven to be relevant across a variety of markets. Trading neophytes are now able to rely on this research to feel more comfortable with their trading decisions. This article will focus on symmetrical triangles, ascending triangles, and descending triangle formations. It is important to note that unexpected news and events can easily alter these formations and can cause the market to change course, however, these formations are important for traders to understand.

Symmetrical triangles form during periods of indecision. This indecision causes the market to make lower highs and higher lows as time progresses. As the trading range narrows, the chart begins to look like a sideways triangle or pennant.  The tug of war between buyers and sellers will eventually resolve itself and the market will break outside of the triangle. Symmetrical triangles are normally thought of as continuation patterns, meaning the market will take some time to consolidate before resuming its longer term trend. Traders will look for triangles as possible new entries in trending markets. In bullish markets, traders will consider buying at the bottom of the triangle, or buying on a close above the upper trend line for a breakout. In bearish markets, traders will do the opposite.

As previously mentioned, the first thing to keep in mind is the longer term trend in the market. By looking at the gold market, we notice that the longer term trend is bullish. Gold has consolidated and we notice a symmetrical triangle has formed.

Gold Chart 1

Gold Chart 1

As we fast forward in time, we notice that gold has bounced off the bottom line of the triangle and has pushed all the way through the top of the triangle.

The next formation we will look at is known as an ascending triangle. Ascending triangles are considered to be bullish formations and are most commonly used in markets that are in an uptrend. Ascending triangle will have flat tops and the bottom trend line will be angled higher. The flat top of the triangle is formed when a market tests a resistance level, fails, and falls back down. The market will then re-test the previous high, fail, and then fall back down. In an ascending triangle, the market will make higher lows on each pull back and will form a slanted lower trend line pointing higher.

Below you will see a chart of November Soybeans. The market has failed on several occasions around the 1400 price level and retreated lower. These attempts to move above 1400 form the flat top of the triangle. Every time Soybeans failed to break 1400, the market made higher lows. These higher lows are what form the bottom trend line to complete the ascending triangle.

Soybeans Chart

Soybeans Chart

Buyers will view the lower trend line as a level of support and could buy when the market pulls back to those levels, or they could wait for a close outside of the top of the triangle before going long the market.

Flat bottom triangles, or descending triangles are the reverse of the ascending triangle. These are viewed as bearish price formations and will have a flat bottom. The market will selloff down to a certain price level, find support, and move higher. The market will then sell back off to re-test the same support line forming a flat bottom. The upper trend line will see lower highs off of each bounce from the bottom support line. These lower highs will form a downward pointing trend line to complete the triangle.

Below is a chart of the September British Pound. On several occasions, the market will test support down at 1.5900. Each time the market reaches 1.5900, the British pound will find buying interest sending the market higher. Each bounce off of support is lower than the prior, forming the downward slanting upper trend line.

Sellers will wait for the market to bounce off of the flat bottom and reach the upper trend line before selling, or they will wait for a close below the bottom support line to signal going short.

Triangle patterns are just a few of the formations traders will consider when analyzing the market.  We will discuss other commonly used patterns in my next article.

Filed Under: Tips & Strategies

About Nick Metzger

Nick Metzger serves as a Senior Broker with Daniels Trading. Nick earned his B.A. in finance and economics from Northwood University. Along with his success in the classroom, Nick excelled on the baseball field as a 4-year starter and team captain. Upon graduation, Nick carried his determination on the field to the financial markets. He began his career with a firm that specialized in option trading where he learned how to evaluate market fundamentals with a technical overlay for timing trades.

Craving employment with a firm offering more diverse execution services, Nick relocated to Chicago and joined Daniels Trading. Since joining Daniels Trading Nick has broadened his execution offerings. He now prides himself in matching clients assets with a wide array of trading opportunities including, broker execution, online trading, automated trading systems, and managed futures.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

Subscribe To The Blog

Footer

Site Navigation

  • Frequently Asked Questions
  • About Us
  • Customer Reviews
  • Contact Us
  • Futures Blog
  • Open a Futures Trading Account
  • Media Resources
  • Fund Your Account
  • Legal Notices

Contact Us

StoneX Financial Inc.
Daniels Trading Division
230 South LaSalle Suite 10-500
Chicago, IL 60604
+1.312.706.7600 Local / Int'l
+1.800.800.3840 Toll-Free
+1.312.706.7605 Fax

Connect with Us

Trustpilot
Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

  • Risk Disclosure
  • Privacy Policy
  • California Residents Privacy Notice
  • Terms of Use
  • Back to top
 

Loading Comments...
 

You must be logged in to post a comment.