After spotting triangle, the majority will act like they have a crystal ball and try to predict where it will break, up or down.
First, it is a neutral chart pattern that can break either up or down.
By analyzing a big number of asymmetrical triangles, you will come across the fact that they act more like a continuation than a reversal chart pattern.
What does that mean?
It means that it tends to continue the trend.
If it forms after an uptrend, it tends to continue upward.
On the other side, if it forms in a downtrend, it has a bearish character.
Consider it as a thing that may help you but do not observe it too much by ignoring other factors.
There are numerous examples of seeing asymmetrical triangle causing a reversal in the market.
Whether it happens in the uptrend or downtrend, you have to wait for confirmation.
Let’s assume that we do not know where it forms.
We are focusing now on that pattern and nothing else.
How to trade it?
As long as the price is in the triangle, you keep waiting.
What you are waiting for?
You are looking for a valid move outside of the triangle.
Firstly, what is valid move?
It is a move that goes outside of the triangle and closes outside.
The fake move would go outside of the triangle but it would close in the inside area.
Once you have a valid move, you got first confirmation, trend confirmation.
If it moves upward, you will look to buy.
If it moves downward, you will look to sell.
Let us explain you how to trade when price moves up from the triangle.
After it moved up outside of the triangle, you should wait for retest and if it offers you bullish sign, you have an opportunity to open a trade.
The reason why you are looking to buy is very simple.
The price made higher high after making higher low which is a clear sign of an uptrend, and in that market conditions, you want to look exclusively for long entries or to buy a coin.
The first area you should look for a trigger is the area of previous high (the area marked green on the chart).
If that area offers you a bullish sign, it would be an ideal setup because the price didn’t pull back too much down which gives us a clear indication of its bullishness.
The second area is the broken triangle trendline that acted as resistance.
If that area is turned from resistance into support, you have a sign for your long entry or to buy a coin.
This is less bullish scenario but still bullish enough to consider opening a trade if risk-reward is good enough.
What signs do you have to look at?
Signs you should look for are either bullish pinbar or bullish engulfing.
Also, the Doji would be quite a good entry sign.
You simply want to see that area holding the price from falling below it.
In the third case, the price could break both areas and come back to the triangle.
It would invalidate the bullish breakout, and you should look for a new sign.
If that move down closes above last low, the price action is still semi bullish.
But if the move makes a lower low, the bullishness will disappear and you should be open-minded for both directions.
The best option would be to wait for a new setup because the previous one is invalidated.
As we explained how to trade bullish situation, it is time to cover an example of a bearish move outside of the asymmetrical triangle.
After it moves down outside of the triangle and forms lower low, you get the bearish condition in which you should focus on looking for short entry.
The first area to look for that is the area of previous low.
Once you get a bearish sign in that area, you have an opportunity to open a trade.
If there is no sign in that area, next place to look for is in the area of previous support.
If support turns into resistance, it is considered as a bearish sign and you can take a trade.
The bearish sign is either bearish pinbar, bearish engulfing candlestick or Doji candlestick.
If price breaks both areas and reenters the area of the triangle, the move is invalidated, and you have to look for a new setup.
Milos is an independent trader, with a background in journalism and publishing. Nomadic by nature, he’s lived in four different countries this decade. He’s fascinated by Blockchain technologies’ potential to reshape all aspects of our lives. Milos got into Bitcoin while completing his degree and hasn’t looked back since, writing about anything crypto-related. He is the co-founder of the Cryptoaims and he has a strong passion to educate people about this revolutionary technology.