The Ascending Triangle Candlestick Chart Pattern

The ascending triangle is a bullish candlestick chart pattern that occurs in a mid-trend and signals a likely continuation of the overall trend. It’s one of the most common chart patterns as it’s quite easy to form - consisting of two simple trend lines. 

The price action temporarily pauses the uptrend as buyers are consolidating. This pause is marked with higher lows pushing for a breakout to the upside, which then activates the pattern.

In this blog post we will discuss how the ascending triangle is formed, what the message that the market sends is, and share tips on a simple but effective trading strategy based on ascending triangles.

What the Ascending Triangle Shows Us 

The ascending trend line chart pattern is a bullish formation. It signals that the market is consolidating after an uptrend, with the buyers still in control. The occurrence of the higher lows is pointing toward a likely breakout as the wedge narrows down.

 

 

 

There are three key features of an ascending triangle:

• Strong trend - In order for the ascending triangle to exist in the first place, the price action must stem from a clear uptrend;

• Temporary pause - This element refers to the consolidation phase, which will help the buyers consolidate their strength;

• Breakout - The break of the upper flat line marks the breakout, which activates the pattern. It also helps us determine the entry, take profit, and stop loss at a later stage.

Bullish continuation patterns can assume different forms - triangles, flags, pennants etc. The ascending triangle is one of the most common formations in this area, as it practically consists of two converging trend lines. 

As a continuation pattern, the ascending triangle is based on the idea that the likelihood of the trend continuing in the same direction is higher than the chance of a reversal taking place. The bulls are in full control of the price action, as they have been successful in pushing the market higher. 

At one point, the consolidation phase starts, which gives the buyers breathing space as they regroup for another push higher. These temporary pauses can take different forms, with the ascending triangle being one of them. 

From this perspective, it’s logical that the side that has been in control so far has a higher chance of winning the upcoming matches than the side that has been on the losing side. The period of consolidation ends once there is a confirmed breakout in the direction of a previous trend.

Strengths and Weaknesses

As outlined earlier, the continuation of an uptrend takes a specific form. This form, in this case the ascending triangle, helps us define the trading environment. On one hand, a break of the upper trend line signals the continuation of the bullish trend. 

On the other, a move below the supporting line breaks the series of the higher highs and invalidates the entire pattern. In this case, the followup is usually a strong move lower as the buyers missed their chance to continue the uptrend. 

Thus, this is the main strength of the ascending triangle - it helps the uptrend to extend. Due to the existence of two trend lines, we are in a better position to determine the take profit and stop loss, if the pattern is activated.

 

The biggest limitation of the bullish triangle, as it’s the case with other types of triangle, is a false breakout. The price action may move above the resistance line, just to return below, and hit a stop loss. In order to minimize the chance of a failed breakout, it’s always advised to consult other technical indicators and confirm the breakout e.g. volume, RSI etc.  

Moreover, consolidation of power takes place as the two lines converge. The narrower the wedge gets, the stronger the breakout usually is. Hence, this amount of power and strength can’t always be controlled, and therefore, it may end up in the price exploding in the opposite direction, although the chances of a continuation of the existing trend are always higher.

Spotting the Ascending Triangle

As said earlier, the ascending triangle is a bullish formation that occurs in a mid-trend. In the chart below, we can see how the ascending triangle looks in the live market. From an existing uptrend, the price action extends higher through the bullish triangle. 

Two trend lines are drawn to connect the highs and lows, with the latter closing in on the former. When the two lines get closer to one another, the likelihood of a breakout increases. Finally, the USD/CHF buyers are able to push the market outside of the consolidation phase in a clear and strong breakout.

 

As you can see in the chart above, the upper line is not exactly flat. In general, it’s extremely rare to see the upper trend line completely flat, as we will  almost always see mild bias toward one or the other side. As long as the resistance line is close to being a flat one, it’s generally acceptable.

Trading the Ascending Triangle

Using the same example, we will now showcase how to trade the ascending triangle. As soon as there is a breakout, which is confirmed with a close above the resistance line, we may consider entering the market on the long side. As with every candlestick pattern, we have two options for the entry - immediately after the breakout candle closes, or waiting for a potential throwback.

The black horizontal line reflects our entry position - the breakout H1 candle close. The stop loss is placed within a triangle, as any move below the upper line will invalidate the pattern. As always, make sure you leave some space to allow for a potential retest of the broken trend line. 

 

 

The blue vertical trend line is a copy of the distance when the triangle was first formed - when two trend lines were identified. The upper end of the trend line tells us where we should consider taking our profits off the table i.e. where the ascending triangle pattern is completed. 

In the end, the market completed the bullish triangle formation and rotated lower. This example shows how profitable ascending triangles can be, as we risked 15 pips to make nearly 100 pips - a R:R ratio of more than 1:6.

Remember, the ascending triangle helps us format the price action and identify trade details - entry, stop loss, and take profit.