Lesson 6B: Breakout Patterns - Ascending Triangle (Bullish)
Hello Friends,
Welcome to the series of Lesson 6. In Lesson 6B, we are going to learn the Ascending Triangle breakout pattern. This is more of a continuation pattern rather than the reversal pattern as oppose to the Falling Wedge pattern that we learned in Lesson 6A.
Lets get straight into the topic. Please be very careful.
We will be referring to the chart above or below to get a better understanding of the topic:
What is Ascending Triangle Pattern?
Ascending Triangle is a bullish continuation pattern, which we quite often see in the crypto world. When a coin is inside the Ascending Triangle, it means it is currently being accumulated, before it breaks out.
Formation:
Lets go back to some Mathematics. We all studied what is a Right Angle Triangle correct? If we look closely at the chart above, we see that it is forming a right angle triangle.
There are two lines to this formation, one is the resistance line, which is horizontal as you can clearly see. The second is the support line which is ascending as you see and it moves up with the price (basically it is inclined moving up as we go from left to right).
The horizontal (resistance) line is formed by 2 or more equal reaction highs touching the horizontal.
The ascending (support) line is formed by 2 or more higher lows touching the ascending support line.
The Rules:
So obviously, you won't just draw an ascending triangle, and think that this is a bullish pattern. There are a few things you need to confirm before making an entry into the coin. Lets look into it.
You must be wondering, how many times the price candle has to touch the resistance line or the support line to consider this pattern valid? Here is the answer:
For the Horizontal (Resistance Line), the price candle has to touch at least TWO or more times to consider a part of this pattern valid. Notice in the chart how the price pull after touching the resistance line FOUR times.
For the Ascending (Support Line), the price candle also has to touch at least TWO or more times to consider this pattern valid. Notice how in the chart the price candle bounces after touching the support line THREE times.
Note (IMPORTANT) :
For the Resistance Line, it is preferred that the candles touching it are equal or doesn't differ in height by too much difference. Usually I only consider the patterns for which the reactions highs are equal for this pattern.
For the Support Line, it is preferred that we have reaction lows as Higher Lows. If we see a reaction low lower than or equal to the previous reaction low, this pattern will be INVALID.
Also note from the chart that there has to be a little distance between the reaction highs, or reaction lows, as you can see in the chart. Just a little is fine.
Since crypto is very volatile, the length of time this pattern occurs doesn't really matter much, but the longer the length the stronger the patter. It's that simple. I stick to 30m or more for this pattern.
I am sure you guys are understanding this really well, as this pattern is very simple to understand or do I make it simple to understand? :P
Lets take a look at the breakout setup.
Continue reading below.....
Welcome to the series of Lesson 6. In Lesson 6B, we are going to learn the Ascending Triangle breakout pattern. This is more of a continuation pattern rather than the reversal pattern as oppose to the Falling Wedge pattern that we learned in Lesson 6A.
Lets get straight into the topic. Please be very careful.
We will be referring to the chart above or below to get a better understanding of the topic:
What is Ascending Triangle Pattern?
Ascending Triangle is a bullish continuation pattern, which we quite often see in the crypto world. When a coin is inside the Ascending Triangle, it means it is currently being accumulated, before it breaks out.
Formation:
Lets go back to some Mathematics. We all studied what is a Right Angle Triangle correct? If we look closely at the chart above, we see that it is forming a right angle triangle.
There are two lines to this formation, one is the resistance line, which is horizontal as you can clearly see. The second is the support line which is ascending as you see and it moves up with the price (basically it is inclined moving up as we go from left to right).
The horizontal (resistance) line is formed by 2 or more equal reaction highs touching the horizontal.
The ascending (support) line is formed by 2 or more higher lows touching the ascending support line.
The Rules:
So obviously, you won't just draw an ascending triangle, and think that this is a bullish pattern. There are a few things you need to confirm before making an entry into the coin. Lets look into it.
You must be wondering, how many times the price candle has to touch the resistance line or the support line to consider this pattern valid? Here is the answer:
For the Horizontal (Resistance Line), the price candle has to touch at least TWO or more times to consider a part of this pattern valid. Notice in the chart how the price pull after touching the resistance line FOUR times.
For the Ascending (Support Line), the price candle also has to touch at least TWO or more times to consider this pattern valid. Notice how in the chart the price candle bounces after touching the support line THREE times.
Note (IMPORTANT) :
For the Resistance Line, it is preferred that the candles touching it are equal or doesn't differ in height by too much difference. Usually I only consider the patterns for which the reactions highs are equal for this pattern.
For the Support Line, it is preferred that we have reaction lows as Higher Lows. If we see a reaction low lower than or equal to the previous reaction low, this pattern will be INVALID.
Also note from the chart that there has to be a little distance between the reaction highs, or reaction lows, as you can see in the chart. Just a little is fine.
Since crypto is very volatile, the length of time this pattern occurs doesn't really matter much, but the longer the length the stronger the patter. It's that simple. I stick to 30m or more for this pattern.
I am sure you guys are understanding this really well, as this pattern is very simple to understand or do I make it simple to understand? :P
Lets take a look at the breakout setup.
Continue reading below.....
Volume play some role in the breakout. It is not mandatory to monitor the volume, but it is very helpful if you do. As you see when the coin is nearing breakout, how there is a sudden increase in the volume, compared to the previous 30 min candles. This is a signal of a breakout. Of course you may use other indicators as well that we went over in the previous lessons as well.
If you had not enter the coin before the breakout, this is always the right time to enter when it breaks out. But do make sure you have your stop loss set a little below the resistance line as once the price breaks out of the ascending triangle, the Resistance Line starts acting as a support. Sometimes you will see that once we see a breakout, the price will come back down to test the support of the resistance line. So having your stop loss just below the horizontal resistance line is always good.
One reason to enter after a breakout, and have your stop-loss below the resistance line is that sometimes in this BTC dependent market, we will see a lot of patterns fail, so for your own safety, its better to perfect the entry after a breakout, and have your stop-loss set right below the support and ride the coin up.
So this was the Ascending Triangle pattern. Easy enough right? Read it again if you didn’t get it and you will. Make sure you try and find such patterns in the past to practice yourself and also practice this with the previous indicators that we learnt.
Lets Summarize:
1. Draw the horizontal (resistance) line and confirm that the reaction highs are at least TWO or more and are equal. Also make sure it is a horizontal line.
2. Draw the ascending line (support) line connecting the Higher Lows, and make sure at least TWO or more higher lows are touching and bouncing from the ascending (support) line.
3. Make sure the ascending line rises up from left to right with the price (is inclined)
4. Monitor the volume when the price is nearing breakout, along with other indicators.
5. Make an entry after the breakout and set your stop-loss right below the horizontal (resistance) line and ride it up.
Note:
Make sure you let the candle close above the horizontal (resistance) line, if a coin breaks out to get a confirmation. Otherwise it might just end up hitting your stop loss.
This is all I have for you in this lesson. Read it carefully. Ask me any questions that you have here or in the Telegram group/channel listed below this post. I try and be available most of the time there. Also, I post most of the charts in the groups/channel that I do not on tradingview, so join the community so that you can learn and earn together.
Since I spent a lot of time writing this up, do me a favor. Like the post if you think this was helpful, and just post a comment giving your thought. This will really tell me how many people out there are liking this, and interested in the lessons. There are many more to come. So stay tuned.
Learn and Earn.
Happy Trading Friends!