Understanding Triangle Trading Strategy

Understanding Triangle Trading Strategy

Submitted by adil on Wed, 05/28/2014 - 19:08

The Right Angle in Trading!

This strategy revolves around identifying different triangle patterns present on price charts, and performing trades with suitable type of contract. A trader who wants to implement this strategy must keep in mind:

He must be able to correctly trace and identify the triangle patterns present in a trend chart.

Different triangle patterns suggest trading with different binary option contracts. He must have knowledge of trading different types of trades to implement this strategy.

According to expiry times, there are two types of brokers. Turnkey platforms offer a fixed set of expiry times to choose from, while proprietary platforms allow you to customize expiry times according to your liking. This makes proprietary platforms more suitable for this strategy.

Finding the triangle patterns:

To identify a triangle, the first step is to correctly draw the trend lines that outline the borders of the triangle. There must be one trend line that connects higher ends of three candlesticks, and another trend line that passes through lower ends of three candlesticks. These two trend lines will become the upper and lower borders of the triangle pattern. For the first three types of triangles, these two lines will be converging, while the trend lines will diverge in case of broadening triangle. This is a manual process; there are some service providers that can do this work automatically for you. If you still like to do it manually, you can benefit from the online triangle patterns available through service providers for help.

• Symmetrical triangle: The trend lines will be converging towards each other in a symmetrical fashion. The price trend will break out of either the upper or lower trend line, if the trend breaks through the upper line, the trader must respond by making CALL contract immediately. Similarly the trader must make a PUT contract if the price trend breaks out through the lower trend line.
• Ascending triangle: You can identify this pattern easily because the upper trend line will be horizontal, while the lower one will move with an upward slope to converge with former. If this pattern is found, the trader must place a CALL option just as the price trend breaks out from the horizontal upper line, and choose a place just above the same line for making a TOUCH trade.
• Descending triangle: You can identify this pattern easily because the lower trend line will be horizontal, while the upper one will move with a downward slope to converge with former. The trader must place a PUT option just as the price trend breaks out from the horizontal lower line, and choose a place immediately below the same line for making a TOUCH trade.
• Broadening triangle: The trend lines will b diverging from each other in a symmetrical fashion. The price trend will break out of either the upper or lower trend line, if the trend breaks through the upper line, the trader must respond by making CALL contract. Similarly the trader must make a PUT contract if the price trend breaks out through the lower trend line.

Expiry times: The trend lines will help you in setting up appropriate expiry times. As default, allow 8hrs minimum for CALL/PUT trades, while 48hrs for TOUCH option trades.