The ascending triangle is a shape that appears on the price chart, indicating that the price may continue to rise after a period of pause. Here’s a simplified explanation:
1. How does it form?
- The upper line (ceiling)
It draws a horizontal line connecting the highest points the price has reached (like 3 times the price tried to rise but stopped at the same ceiling).
- The lower line (floor)
It draws an upward sloping line connecting the lowest price points, but each time the 'floor' is higher than the previous one (buyers are gradually raising the price).
2. What does this shape mean?
- Buyers are stronger
Every time the price drops, people buy at a higher level than the previous time, pushing the price up.
- The resistance is strong
But there are sellers stopping the rise at the same ceiling every time.
3. When to enter the trade?
- When the price breaks the ceiling (closes above the upper line), this is a signal that buyers have overcome sellers, and the price is likely to continue rising.
- Example:
If the ceiling is at $100, and the price breaks it and reaches $102, it is expected to rise further.
4. Expected upward target
- Approximately the same height as the triangle
Example:
If the difference between the ceiling and the floor at the beginning of the triangle is $10, and the breakout occurs at $100, the target will be $110.
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Important note:
- Do not enter the trade before the breakout! Wait for confirmation of the ceiling break.
- If the formation of the triangle takes too long without a breakout, it may lose its meaning.
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Imagine it as 'wrestling':
Buyers are trying to raise the price, while sellers are stopping them at a certain ceiling. In the end, if the buyers win (by breaking out), the price soars up! 🚀
