ArticleHunting for Triangles

T2W Bot

Staff member
1,470 70
Trend analysis is a complex process that goes beyond trend lines, channel lines and retracements.   An important aspect of this type of analysis is the identification of patterns that reinforce trends and of formations that signal the reversal of trends.
Chart formations that show the extension of trends are called continuation patterns. They consist of pauses within trends and they are generated by traders who realize some or all of their profit typically ahead of significant releases of economic data or strong technical level. These behavioral patterns translate into chart formations and tend to look like neutral moves.  However, they can either slope against the original trend or, more rarely, slope in the direction of the trend. The consolidations are fairly short ? but not always.
The most important continuation patterns are: flags, pennants, triangles and wedges.  Let?s focus on triangles.
Differences between a Pennant and a Triangle
A pennant is trend continuation...

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Senior member
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In this article, well known author Cornelius Luca discusses the ins and outs of trading using triangles.

SOCRATES

Veteren member
4,966 134
Yes, all very good. However what do you do about these triangles when you find them, because dealing with these formations in textbook mode is a very different proposition to dealing with them in live trading in real time, is that not so ? I ask you because all these ideas have a perverse habit of delivering the result, the opposite of what in textbook parlance is the result expected, to the dismay and disconcerting shock of the trader, I respectfully submit....

Pippppin

Well-known member
386 18
Mathematical evidence

For the past 6 years or so I have been researching triangles...in particular seeking mathematical evidence for which way a market is going to move when prices are oscillating within a triangle.

One of the problems with the knowledge lab article is that triangles are usually drawn with hindsight. Figure 8 is interesting. The triangle is described as "bearish". My mathematical analysis would have suggested the exact opposite.

Has anybody else investigated triangles in a more quantitative way?

Mr. Charts

Legendary member
7,367 1,183
Yes. Years ago on UK stocks and more recently on an ongoing basis with US stocks intraday.
The results are similar.
The key to a decent success rate is the overall market condition and that of the sector.
Obviously in a running bull or bear market continuation patterns work better than in a ranging one.
However, the key for me on Nasdaq stocks is reading quite different patterns and then level 2 and T&S to confirm or otherwise the likely imminent move; on other stocks, (as well as Nasdaq), it is an understanding on whether and how much volume moves price to indicate possible accumulation or distribution.
In my experience triangles are extremely useful in alerting me to possible moves, BUT NOT necessarily in the direction most people would anticipate.
I have plenty of examples of live screen shots in my image data base.
As Socrates says, live trading is a whole different ball game to spotting triangles in retrospect which then "prove" how well they work.
FWIW, I do not include them in the high probability patterns which actually work in real life.
Richard

SOCRATES

Veteren member
4,966 134
Yes, because proficient live trading comes from "complete understanding" and not from what is implied to be other than that, as Mr Charts so aptly explains above.

Proficient live trading comes from having a very complete and comprehensive inventory of tools with which to tackle a great variety of tasks, some easy and some complicated, and occasionally some impossible.

Out of this array of tools the right ones are chosen, like a surgeon would do when carrying out an operation, to tackle the job in hand, or rather, each minute component, but all at the same time, and that, is the main difficulty most people face.

So you see, none of it is that simple, but I am interested to see, what light Cornelius Luca is willing or able to shine upon his statements in order to illuminate them properly for the benefit of the membership.

micb1

Newbie
3 0
triangle formations

I not sure if this is the right place to put this

I am new to trading and have been looking a triangle formations

i have been watching exel stock ftse 100 and would like to know if I have drawn this triangle right and also what does it mean?

any advice would be beneficial

thanks

mike

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sulong

Active member
249 15
micb1 said:
I not sure if this is the right place to put this

I am new to trading and have been looking a triangle formations

i have been watching exel stock ftse 100 and would like to know if I have drawn this triangle right and also what does it mean?

any advice would be beneficial

thanks

mike
I thought it was odd that this guy spent 1 sentence of that article talking about "what a triangle represents".

A tri. is a form of price consolidation.
A tri that develops with in a trading range (like you have) will have different characteristics than those that develop within a breakout or trending environment.
When studying price pattern's, It's very helpful to note the most recent price action just prior to the formation of the pattern of interest.

patterns357

Newbie
7 0
Chart 11 should be labeled descending. I would encourage you not to bias the reader with a generic outcome.

SOCRATES

Veteren member
4,966 134
patterns357 said:
Chart 11 should be labeled descending. I would encourage you not to bias the reader with a generic outcome.
Correct.

wwatson1

Well-known member
341 1
Not a very good example of a triangle pattern I would discard this stock as a possible trade.

If you really must make the trade I suppose you could try going long if there is an upside break of the strong 870 resistance.

But again I would look for a better pattern.

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Pippppin

Well-known member
386 18
Here is a beauty...

Time to revive the "hunting for triangles" thread

Have a look at the monthly chart for the US stock Viacom Inc (attached - ticker VIA). Which way is it heading..........?

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Denny

Member
52 1
Triangles

My experience with triangles is that they are not always clear cut as to whether they are continuation patterns or reversal, Nor whether bullish or bearish. My feeling is that it is best to wait for the move out of the box before trading. Regarding Viacom I see it has closed outside of the box twice, which indicates that this would be a good one to short at the moment.
When you think about it triangles, pennants and wedges are just congestion zones, which are ever decreasing and are always going to breakout some way or another. This is often confirmed looking at the contraction of the bollinger band which often accompanies it, because they are both showing the same thing.