The main characteristic of ascending triangles is making higher lows and equal highs.
Their semi bullishness comes exactly because of this reason.
While it has semi bullish character, we won’t avoid saying that up move has more chance, but neither long nor short trade should be entered without confirmation.
It may form either after an uptrend or a downtrend.
If it happens after an uptrend, it has a little bit more bullishness inside itself because triangles are in general trend continuation chart patterns.
However, if it happens in a downtrend, its semi bullishness is not that high considering the fact that up move would be against the general trend.
Let us introduce you to two ways of trading this chart pattern.
The first one would be bullish scenario while in second one we will cover bearish scenario as well.
How to trade bullish scenario?
To trade this chart pattern successfully, you need two confirmation.
The first confirmation will be the closure outside of the triangle.
As we are covering the bullish scenario, it has to close above triangle resistance that forms in the area of equal highs.
By closing above the resistance, it creates a higher high.
Because it was creating higher lows, we got bullish market conditions where price is making higher highs and higher lows.
After making a bullish setup, you are going to look for a long entry or to buy a coin.
Buying makes sense only after you get an entry confirmation.
The area to look for confirmation is the area of previous resistance.
If that area brings new buyers and shows you bullish sign such as bullish pinbar or bullish engulfing, you have an opportunity for opening a trade if risk-reward is profitable.
However, if the price doesn’t give you bullish sign on the retest of broken resistance and it enters back into the triangle area, the setup is invalidated.
After invalidating bullish setup, it now becomes at least neutral, in some cases even semi bearish because bullish setup was invalidated and buyers showed weakness by not being able to maintain the momentum.
Even if the statistic is not in favor of the bearish scenario, we will cover that one as well.
When you mention statistic, most people think there is a significant difference but the fact is that it is not that big.
Between 55% and 60% patterns break up, while the rest (40-45%) break down.
The number of those that are breaking down is large enough to consider that trade option as well as bullish one.
How to trade bearish scenario?
While we had only one bullish scenario, we have two bearish ones.
For both of them, we need two confirmations.
The first confirmation is the same for both.
It is the move outside of the triangle.
Since we are talking about the bearish scenario, it has to be a move down.
Once you have move down and closure outside of the triangle, you have to look for second confirmation.
The second confirmation will be the bearish retest of broken support.
There are two areas that can be considered as support and that’s why we have two areas to look for the confirmation.
The first area is the area of the previous low.
If the price doesn’t reclaim that area and gets rejected forming candlestick such as bearish pinbar or bearish engulfing, we have an opportunity for a trade.
If that area acts as a resistance, that would be very bearish since the buyers were not able to push price higher.
The second area to look for a bearish retest is the previous trend line that was formed by higher lows.
That scenario is less bearish since the price retraced much higher that confirms active buyers, but if you get strong bearish sign such as bearish pinbar or bearish engulfing and profitable risk-reward, you can consider that as an opportunity to open a trade.
If the price breaks above both resistances, the short setup is invalidated and it is time to look for new trade opportunity rather than to force the trade without confirmation.
Invalidated bearish setups became either neutral or semi bullish depending on the type of invalidation.
What is the main issue of bearish scenario?
The problem with the bearish scenario is that it isn’t that clear.
Even when price closes below the support, it doesn’t usually form lower low – lower high formation which is the main thing you need to consider something bearish.
That’s why we would suggest you to first look for lower low – lower high price formation and if that happens to look for selling or short entry.
On the other side, once price closes above resistance, the area to look for long entry or buying a coin is evident.
Because of that, the price usually front run the area and don’t even touch it before going further up.
The bearish scenario is not that impulsive and it goes through several phases.
First, it has to form lower low lower high formation and then we can expect the price to start moving faster and dropping more violent.
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.