Highlights ①. Gate's "Basic Futures Contracts" course introduces various methods of technical analysis that are commonly employed in futures trading. The aim of these courses is to help traders establish a comprehensive framework for technical analysis. Covered topics include the basics of Candlestick charts, technical patterns, moving averages, trend lines, and the application of technical indicators. ②. This article, as Course XII of the series "Master Technical Analysis", introduces candlestick pattern-Ascending Triangle, and covers the concept of the pattern, its characteristics, technical meaning, as well as its application in trading.
1. What is Ascending Triangle?
The Ascending Triangle pattern describes the trajectory of a price that initially rises, and as bullish momentum wanes, the price undergoes a downturn. However, this bearish phase doesn't last long, as more buyers enter the market and push the price upwards again. Intriguingly, the subsequent bullish run often concludes at a height similar to the previous peak before transitioning into another bearish phase. Yet, each new low reached is higher than the preceding one. Consequently, while the price experiences resistance at roughly the same level during its upward movement, it finds increasingly stronger support during each descent, consistently setting lows that surpass the previous ones. By connecting these highs and lows with two lines, we can illustrate a right-angled triangle. The triangle's upper line remains horizontal, while its lower line slopes upward, as depicted below:
2. How to identify ascending triangle? ①. The pattern is more common in the bullish trend, but it can also be in a declining trend; ②. The price fluctuates to hit a series of highs that are basically at the same height, yet successively pivoting at lows, each higher than the previous. By drawing two lines that respectively pass through the highs and lows, we can get a right-angle triangle with the upper edge going horizontally and lower edge sloping upward; ③. The trading volume gradually shrinks from the left side to the right of the triangle.
3. Technical meaning of ascending triangle The term "ascending triangle" is rooted in the technical representation of the pattern. A breakthrough at its upper edge, following the formation of this pattern, often indicates a potential bullish market. Essentially, the ascending triangle symbolizes how buying power gradually intensifies and ultimately overpowers the sellers. Consequently, with each dip, the price finds increasingly robust support, leading to a series of lows that consistently rise. Therefore, when this pattern appears, it typically hints at the potential for a bullish market. This interpretation aligns with the Dow Theory's definition of an upward trend, which characterizes a bullish market as having price waves where each wave reaches a higher peak and rests at a trough higher than the last.
4. Application
As you already know, the ascending triangle often signals a bullish trend. Let's delve into how to pinpoint specific buying opportunities using this pattern.
①. The first buying opportunity occurs when the price breaks up the upper edge of the ascending triangle, with a green candlestick closed that day. The below shows the position of the first buying opportunity.
②. After the price breaks above the upper edge, the price rises at first, then falls but picks up again before it gets below the upper edge. The second buying opportunity occurs when the price keeps rising to get above the previous high, as depicted here:
③. If the price falls below the lower edge of the ascending triangle, it is an exit signal:
5. Use Case
The chart displays the 4-hour candlestick for the Gate futures pair BTC/USDT. An ascending triangle is evident between November 5 and 12, 2020, during which BTC's price increased from US$13,500 to approximately US$15,800, followed by a period of fluctuation. Once the pattern was established, its upper edge was breached at $16,000, leading to a significant bullish surge.
6. Summary
The ascending triangle, a prevalent candlestick pattern, is frequently employed by traders in real-world trading scenarios. Its technical analysis is rooted in Dow Theory. It's important to note that the pattern doesn't always manifest in its standard form; it has numerous variations that are equally significant. In practical trading situations, we advise a versatile approach when interpreting this pattern.
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Disclaimer This article is for informational purposes only and does not constitute investment advice. Gate is not responsible for any investment decisions you make. Content related to technical analysis, market assessments, trading skills, and traders' insights should not be considered a basis for investment. Investing carries potential risks and uncertainties. This article offers no guarantees or assurances of returns on any type of investment.
