According to two decades of trading research, the ascending triangle pattern has an outstanding 83% success rate in bull markets with an average potential profit of +43%. It’s a well-known, reliable, accurate pattern that can generate good profits.
Incorporating the ascending triangle pattern into your trading strategy could help you reap its rich rewards. Discover how to utilize the ascending triangle pattern to enhance your trading success.
Ascending Triangle Explainer Video
What Is an Ascending Triangle Chart Pattern?
An ascending triangle is a powerful technical analysis pattern with a predictive accuracy of 83%. The pattern is flexible, can break out up or down, and is a continuation or reversal pattern.
An ascending triangle has one inclining trendline that connects a series of higher lows and a second horizontal trendline that connects a series of highs. An ascending triangle can be bearish or bullish or a reversal or continuation pattern, depending on the direction of the price breakout.
- An ascending triangle occurring during a price uptrend, with a price breakout above the resistance line, is considered a bullish continuation pattern. (See chart below)
- Conversely, an ascending triangle occurring during a price downtrend, with the price breaking out above the resistance line, is a reversal pattern.
KEY ASCENDING TRIANGLE TAKEAWAYS
- The ascending triangle has a reliability of 83% in testing 1.
- The average price increase during a bull market is 43%.
- The ascending triangle has a horizontal resistance line and an inclining slope support line.
- If the price breaks out of the triangle in the direction of the previous trend, it is a continuation pattern.
- If the price breaks out of the triangle in the opposite direction of the previous trend, it is a reversal pattern.
Ascending Triangle Chart
TradingView’s powerful pattern recognition algorithms have autodetected this ascending triangle pattern. TradingView detected the pattern and set a price target equal to the length of the triangle’s apex. The target was flagged green once the target was achieved.
What the Ascending Triangle Indicates
The ascending triangle chart pattern occurs when sellers are in control at the resistance price points. As buyers become more active, demand starts to outstrip supply, and the lows move higher. Eventually, a breakout occurs in either direction, signaling a reversal or continuation of the trend.
The ascending triangle chart pattern is considered a reliable continuation or reversal point in the market, with an 83% success rate on an upward breakout in bull markets. This is because buyers begin to take control of the market when the price breaks above the triangle.
How Reliable is an Ascending Triangle Pattern?
An ascending triangle stock chart pattern has an 83% success rate on an upside breakout of an existing uptrend. When the price breaks through resistance, it has an average 43% price increase. Following a downtrend, the pattern is 79% successful, with an average price decrease of 16%.
|Chart Pattern||Success Rate||Average Price Change|
It should be noted that this pattern does not guarantee a profit.
How to Identify an Ascending Triangle?
An ascending triangle is identified by two converging trendlines on a chart. The upper trendline represents the resistance, while the lower line represents support. As the price moves up and down between these lines, it creates a triangle pattern. When the price breaks above or below one of these lines, it indicates that either bullish or bearish momentum is gaining strength. Investors should watch for a break above the upper trendline to enter long positions and look for a break below the lower trendline to enter short positions.
It is important to note that ascending triangles can be either continuation or reversal patterns, depending on the direction of the prior trend. If the market was in an uptrend prior to the triangle forming, then a break above the upper trendline is likely to lead to prices continuing in the direction of the prior trend. Similarly, if the market was in a downtrend before forming an ascending triangle, a break below the lower trendline could signal a continuation.
How to Draw an Ascending Triangle?
There are two simple steps for drawing the ascending triangle to prepare for the trade. (See the chart below)
- Draw the horizontal resistance trendline joining the price highs
- Draw the support trendline connecting the higher lows
If the security price breaks out above the triangle resistance, especially with volume increases, it signals a possible 83% chance of going higher. Generally, the pattern should be visible on an intraday or daily chart. After identifying the triangle, we need to measure and set a price target.
How To Trade an Ascending Triangle Chart Pattern?
When trading this chart pattern, it is important to set your stop loss inside the triangle pattern and adjust your target level based on the size of the breakdown. You can expect a target of 50% up to 100% of the distance from the entry point to the triangle resistance line.
Traders should pay attention to volume when trading an ascending triangle chart pattern. Higher volume on the breakout is often considered a confirmation of trend reversal in this setup (see above chart). This means traders should be vigilant and wait for higher volumes before entering a trade on any breakout situation.
Ascending Triangle Entry and Exit Points
The entry point for an ascending triangle pattern is at the price breakout of the triangle, either up or down. Traders should place a stop-loss order below or above the breakout to protect against potential losses. The exit point can be determined by placing an initial target at 50% of the triangle’s height. (See Chart Above)
It is also important to remember that ascending triangles can fail at a rate of 17%, and traders should always have an exit strategy in case of a failed pattern. Furthermore, managing risk during any trade is essential, as the potential for loss is still real. Using proper risk management techniques, traders can maximize profits while limiting losses.
How to Measure an Ascending Triangle & Set a Price Target.
If the distance from the triangle peak to the horizontal support is 10%, the logical price target should be 10% above the breakout. It is calculated by adding the pattern’s height to the breakout point. This gives traders a good indication of where to expect prices could move following a successful breakout. Once the ascending triangle breakout is confirmed, traders should set their stop-loss order just below the breakout zone.
The chart above shows that the height/depth of the ascending triangle (Point A) equals the price target (Point B).
The Ascending Triangle Pattern Timeframe
Ascending triangles can form on any timeframe but occur more frequently on intraday charts, 5, 15, or 60-minute time frames. This makes the ascending triangle a great pattern for day traders. An ascending triangle with a perfectly horizontal resistance line is rare, but it is OK if there is a slight incline.
Even on an hourly time frame ascending triangle pattern typically takes weeks to form. Traders should monitor the stock over a medium-term period on an hourly or daily chart and be prepared to enter at any time to maximize potential profits.
It is important to consider volume as an additional indicator when attempting to identify and trade the ascending triangle pattern.
What Happens After an Ascending Triangle Pattern?
Two decades of research by Tom Bulkowski show that after an ascending triangle pattern is confirmed on a break of either the support or resistance line on higher volume, the price increase averages +43%.
Once the ascending triangle pattern is confirmed, traders should consider opening a long or short position depending on the direction of the price move.
What Happens with a Failed Ascending Triangle Pattern?
An ascending triangle in a bull market fails 17% of the time. When an ascending triangle pattern fails, the stock price fails to achieve the price target or reverses back to the breakout zone. At this point, it makes sense to discard the pattern.
An Ascending Triangle Pattern in an Uptrend
The ascending triangle often forms within an existing uptrend in a bull market. This is usually a sign of strength and often results in the continuation of the uptrend. Traders should be aware that this pattern may provide false signals, as it does not guarantee that the trend will continue, and prices could reverse at any time.
How to Automatically Identify Ascending Triangles?
You can automatically identify ascending triangle patterns using TradingView. Go to TradingView and click Indicators > Technicals > Patterns. Next, select Ascending Triangle Chart Pattern. Now, a chart with an ascending triangle pattern will be clearly marked.
What are the Ascending Triangles Rules?
- The ascending triangle pattern can appear anytime during bull or bear markets.
- The resistance line should be roughly horizontal with almost equal high price points within 4%.
- Price can break out higher or lower.
- When trading with ascending triangle patterns, traders should set their stop loss below the breakout line.
The Best Ascending Triangle Pattern Scanners
There are currently two trading platforms offering ascending triangle scanning and screening. TrendSpider and FinViz enable complete market scanning for ascending triangles. Finviz is a good free pattern scanner, whereas TrendSpider enables full backtesting, scanning, and strategy testing for chart patterns.
TrendSpider Pattern Scanning in Action
Scanning for ascending triangle patterns with TrendSpider is easy. Visit TrendSpider, select Market Scanner > All of the Following >Chart Pattern > Triangle, Ascending > Scan. You will be presented with a list of stocks with ascending triangle patterns.
Using AI-Driven Pattern Scanning
One of the major benefits of using AI-driven technical analysis tools like TrendSpider is the ability to backtest historical data. This allows traders to compare the performance of their strategy over different periods and markets. With TrendSpider, you can go back in time to find stocks exhibiting ascending triangle patterns and then use the platform’s advanced analytics tools to analyze how effective this pattern was for trading at any given time. TrendSpider’s AI-driven algorithms also help traders identify the most reliable entry and exit points for ascending triangle patterns.
By combining AI-driven technical analysis with traditional charting methods, TrendSpider helps traders take full advantage of market opportunities presented by the ascending triangle pattern. With features such as automated alerts, backtesting, and real-time market data, you can quickly spot and take advantage of ascending triangle patterns as they emerge.
How to Find Ascending Triangle Pattern Stocks Today?
FinViz has a great feature for scanning for ascending triangle patterns. You can easily find stocks exhibiting this pattern by selecting ascending triangles as your scan criteria. This is especially useful to traders who want to monitor potential trading opportunities.
The first step to finding stocks with potential ascending triangle patterns is to select a set of criteria. FinViz offers a range of pre-defined filters and sorting options, enabling traders to quickly narrow their search by sector, industry, market capitalization, and more. After selecting the desired criteria, traders can apply the filter to the Finviz screener.
Once the filter has been applied, traders can then view the results on a chart interface. Depending on the complexity of their search criteria, several stocks may meet the criteria and appear to have potential ascending triangle patterns. By clicking on each stock name, traders can then open up a chart.
Frequently Asked Questions
How accurate is an ascending triangle pattern?
Ascending triangle patterns are 83% accurate as an uptrend continuation pattern in a bull market. The accuracy changes if in a bear market and if the pattern acts as a continuation or a reversal pattern. Consult Tom Bulkowski's book, The Encyclopedia of chart patterns, for details.
Is an ascending triangle bearish?
An ascending triangle is bearish when it occurs in a bear market during a price downtrend. In this case, the pattern acts as a continuation pattern. When formed in an uptrend during a bull market, it can be either bullish or bearish, resulting in a reversal or continuation of the trend. It all depends on how the price responds.
How do you trade ascending triangles?
The best risk-reward for the ascending pattern is a bullish play. According to testing, an upward breakout of the triangle increases on average 43%, versus a downward break which only averages -13%.
Can an ascending triangle be bullish?
Yes, an ascending triangle can be bullish. When formed in an uptrend during a bull market, it can result in either a reversal or continuation of the trend. To determine which way the price will go, traders should watch how the stock responds when it reaches support and breaks out above or below the triangle.
Is an ascending triangle good or bad?
An ascending triangle is neither good nor bad; it depends on the context. When an ascending triangle is formed during a bear market, signals a continuation of the downtrend. It usually signals a continuation if it is formed in an uptrend during a bull market. Traders should watch how the stock responds when it reaches support and breaks out above or below the triangle to determine whether they should enter long or short positions.
What is the success rate of an ascending triangle?
According to Tom Bulkowski's research, the success rate of an ascending triangle is an 83 percent chance of a 43 percent price increase in a bull market on a continuation of an uptrend.
How do you target stop losses in ascending triangle patterns?
Traders should set the approximate target stop loss level in an ascending triangle at the point below the breakout of the triangle. The exact percentage stop loss depends on the price target expectations and the timeframe.
What are the benefits of trading ascending triangles?
The benefits of trading ascending triangles are that it can give traders a higher probability of successful trades because the triangle pattern typically signals a continuation of an uptrend. Also, stop losses can be set at secure levels, and traders can easily determine whether to enter long or short positions due to the breakout point above or below the triangle.
What are the risks of trading an ascending triangle?
The risks of trading an ascending triangle include the possibility of false breakouts, which can cause traders to enter incorrect positions. Additionally, the breakout may not reach the expected target, leading to losses if stop losses are not set correctly.
Can ascending triangles fail?
Ascending triangles fail approximately 17% of the time during a bull market. Therefore, it's important to understand the risks associated with this strategy. Always use stop losses and take profits when trading patterns to minimize risk and maximize profit potential.
What is the psychology behind ascending triangles?
The ascending triangle pattern reflects sentiment and the battle between supply and demand. When the market is bearish, investors hesitate to buy stocks at their current prices, resulting in lower volume and slower price movements. If sentiment improves and buyers outnumber sellers, volume increases, and prices rise. This is why ascending triangles offer an average profit potential of 43%.
How reliable is an ascending triangle pattern?
The ascending triangle pattern is a reliable chart indicator, with success rates of 83 percent during a bull market on an upward breakout. During a bear market in an uptrend price, ascending triangles are much less reliable.
Do ascending triangles hold?
Yes, ascending triangle patterns hold 83 percent of the time, according to decades of research compiled by Tom Bulkowski in his book The Encyclopedia of Chart Patterns.
How to identify ascending triangles?
How to measure an ascending triangle pattern?
TradingView can automatically measure an ascending triangle pattern to set a price target. Alternatively, to measure manually, use an arithmetic chart and plot the distance between the triangle's apex and base. This distance will be the future price target that you should plot on the chart.
Learn the Success Rates of 65 Chart Patterns The Encyclopedia of Chart Patterns by Tom Bulkowski details the reliability and success rates of 65 chart patterns and shows you how to trade them. It is an indispensable resource for traders and investors looking to increase their profitability by taking advantage of stock chart patterns. This comprehensive reference book contains in-depth explanations and detailed illustrations of more than 65 different patterns, including Head and Shoulders, Double Tops, Wedges, Flags, Gaps, and more.
Researched statistics in this article are reproduced with the permission of the author.