The ascending triangle is a continuation pattern considered to be tradeable as it has a defined entry point, stop loss, and profit target. On the price chart, it appears as a horizontal line connecting the highs to an upward moving trendline connecting the lows. Each ascending triangle has a minimum of two highs and two lows. In comparison, a descending triangle has a horizontal lower line and a descending upper trendline.
Ascending triangles are continuation patterns because the price usually breaks in the direction it was going before the pattern. As with other types of triangles, the volume usually contracts during the ascending triangle pattern. Keeping an eye on false breakouts, investors usually enter when the price breakout takes place. The position they take depends on the direction of the breakout – buy for upside direction and sell for downside direction. The stop loss is placed just outside the triangle. To calculate the profit target, traders take into account triangle height at maximum width and adjust that measurement according to the breakout price.
With ascending triangles, the wider the pattern, the more risk/reward it will carry. For narrower patterns, the stop loss becomes smaller; however, the profit target is still based on the largest part of the pattern. In terms of challenges for traders looking to use ascending triangles, false breakouts are an important consideration. The price may fluctuate, moving in and out of the pattern in either direction and not gaining any real momentum.
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