Using Triangle Patterns to Determine Price Movement

by Wayne A. Thorp, CFA

Using Triangle Patterns To Determine Price Movement Splash image

Pick up any text on technical analysis and charting and you are likely to come across some discussion of price patterns and their potential use in trading. One pattern that appears quite frequently is the triangle.

triangle types

In general terms, a triangle is formed by the convergence of two trendlines drawn on a price chart. One trendline connects the price peaks and one connects the price troughs of a security. Therefore, at least two points (peaks or troughs) are needed between which the trendline is drawn. Over time these peaks and troughs narrow and, depending on the price behavior, the triangle pattern may or may not be confirmed. Triangles come in several forms and can take on different names, but the most common are right triangles and symmetrical triangles.

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Wayne A. Thorp, CFA is a vice president and senior financial analyst at AAII and editor of Computerized Investing. Follow him on Twitter at @AAII_CI.


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