For traders who prefer graphical analysis in their trading, a figure such as extending triangle will help to determine the optimal entry points into the market. This candlestick formation is a shape that starts from one point and consists of two lines, the distance between which increases over time. One line is support, the other is resistance.If you display the shape as a diagram, it will look like this:
How to use an expanding triangle in trading
This figure indicates the existence of uncertainty in the market. In such a situation, many traders prefer not to enter the market and wait until the market decides on the further direction of movement. And that’s the right thing to do. However, the expanding triangle will help to open a trading position at the very beginning of a new movement.And now I’ll give you some tips on how to use the figure in trading.Formation can be considered formed if it has at least five waves.
Trade order can be opened provided that the price of the currency pair is outside the triangle. You have to pay attention to the volumes. If a break-down of one of the lines of the triangle is a serious decision of the market, it will be accompanied by large volumes.
The quality of the signal will increase significantly if, after a break-down of any of the lines, the price returns to the broken line again after a certain distance and is displayed from it. In this case, the chances of a profitable trade are very high, because this situation almost eliminates a dangerous false break-down.
Buy at break-up of the upper line (resistance). If you break the lower line (support) – sell.
Transactions must be opened in strict accordance with management rules.
Now about the size of the stop-loss. It is equal to the rollback size (price return to the line), which I wrote above.
Take-profit may be equal to the width of the triangle at a breakdown. A more cautious option is 80 percent of this distance.Come back to the scheme to make it clear:
There are other options to follow the deal after its opening. For example, it is possible to close only a part of a deal by take-profit to try to get more profit. And it is possible not to use take-profit at all, to transfer the deal into a lossless one and then to decide on its closing, based on their assessment of the market situation or indicators. Finally, it is possible to fix the profit using a trailing stop.
In conclusion, I’d like to suggest that you see how an expanding triangle might look on the chart: Fyodorov’s Inga2.05.2018