When we ask what are the similarities between a Nintendo game and Forex, the answer has the same words: Triangle strategy. This is the name of a well-known and famous Nintendo game, and it is also the name of a trading strategy that uses the triangle charts for trading.
Everyone is talking about Nintendo's new game Project Triangle Strategy will be released on March 4, 2022. Do you know that the traders of the Forex market also have their Triangle Strategy? Read on and we will tell you what it is all about.
Japanese candles form figures as they move across the price chart. These figures can be considered, according to technical analysis, as a trend reversal or trend continuation.
Triangle trading requires understanding that technical analysis requires a certain flexibility and adaptability. Many triangles are formed, and if we use a larger time frame, then they will have greater validity when they are broken.
Types of triangles to trade
Several types of triangles are supported by forex. There are symmetrical, ascending, descending, and expansive triangles. In addition, in this type of formation, we must include wedges, which are usually quite reliable, and flags.
Likewise, all triangles strategy have a series of conditions for the figure to be considered valid and, consequently, its break can operate.
Triangles must be formed with two trend lines. These should be drawn together with important supports or resistances. They are expected to have at least two or three support points for better performance.
- Symmetrical Triangle: Symmetrical triangles often occur amid trends, whether they are bearish or bullish, and their breakout is usually in favor of the previous trend. Its sides are symmetrical, it is a "perfect" triangle and it has to comply with the marked parameters. It is usually a zigzag movement.
- Ascending and descending triangles: Ascending or descending triangles are variations of symmetrical triangles. In the ascending triangle, the top of the triangle is flat while the base is ascending. Most likely it is forming in the middle of an uptrend, and therefore we can expect a breakout in favor of the previous uptrend: uptrend.
- Expanding triangle: They are not very common and in the few occasions in which I have encountered them, their reliability has been rather scarce. Perhaps it is the trader and not the market. Unlike normal triangles, expanding triangles have their apex at the origin of the movement. Another peculiarity is that the volume increases as the technical pattern develops and usually has a bearish trigger. As a note, I will say that they should occur in bullish markets, and as the end of a trend.
In triangle strategy, the most important factors are time and volume. To trade a triangle validly, the price should break its trend line when it has advanced between two-thirds and three-quarters of the horizontal width of the triangle.
When the price is approaching the apex and has not broken, it is no longer valid for Trading, because it can break wherever it wants. Even make a move that has nothing to do with what we had planned in our triangle strategy.
Within triangles, the volume should decrease and increase on the breakout, which gives validity to the move. If we see a breakout with no volume, it is likely that it was a false breakout, or that a different figure is being created. The price will move from its break the same distance that the base measures.
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