Chart pattern trading strategy is one of the most effective ways to catch the major market movement. Those who are relatively new to the trading profession often think chart pattern trading strategy is not profitable. Unlike them, the pro-UK traders prefer to trade the major chart patterns as it allows them to make a huge profit within a short period. Those who have extensive experience with chart pattern trading strategy will understand the role of fundamental factors. Most of the time, the major breakout occurs during the event of high impact news. So, if you can predict the price movement of a certain asset, you can easily make a huge profit by using chart pattern trading technique
Understanding the trading technique of different chart pattern is not so easy. Though there are many popular chart pattern, today we are going to learn about triangle chart pattern trading strategy.
Formations of the triangle pattern
Most of the rookie traders tend to look for the triangle pattern in the lower time frame. But trading the major chart pattern in lower time frame is extremely risky. If you want to make a profit in the Forex market, make sure you look for the triangle pattern in the higher time frame. Though daily time frame trading is extremely boring, the pro traders prefer to use the higher time frame. Once you spot a triangle like a pattern in the price chart waits for the major breakout.
Breakout of the pattern
Almost 90% of the time, the price tends to break in favor of the long term market trend. You need to identify the long term prevailing trend in your online trading platform based on a higher time frame. Once you have successfully identified the market trend, wait for the major breakout of this pattern. Sounds little bit complex? Let’s give you a simple example to make things easier. Imagine you have spotted a bullish triangle pattern in the daily chart. According to the basic theory, you need to look for a bullish breakout. If the price of a certain asset crosses above the triangle resistance level, you can consider it as a bullish breakout and execute long trades.
Setting up the stop loss and take profit
Setting up the stopples is a little bit complex when it comes to the triangle pattern trading strategy. Most of the retail traders use wide stop loss and loses a big portion of their investment. But the smart UK traders at Saxo prefer to use the price action confirmation signal. Learning the details of price action confirmation signal is easy. Once you focus on the reliable formation of the Japanese candlestick pattern you can easily trade the market with tight stop loss.
When it comes to setting up the take profit level, make sure you are executing the trades with simple logic. Most of the time, the price tends to cover up the height of the triangle. In other words, if the height of the triangle is 100 pips, you can expect 100 pips bullish run after the bullish breakout of this pattern.
Trading the triangle pattern is one of the easiest ways to make money online. Those who are relatively new to the trading profession might not understand why they should trade the market in a higher time frame. But if you use the demo account, you will understand the importance of higher time frame trading strategy. As a chart pattern trader, try to learn more about the Japanese candlestick pattern so that you can make a decent profit in the long run. Forget about indicators and EAs in the forex market. Try to keep things simple and execute the trade in favor of the long term trend. And never let the emotions to trade on behalf of you since it always results in heavy loss.