What Is a Triangle Pattern in Technical Analysis?
Unlike the expanding triangle Elliott wave, this pattern is portrayed by drawing some trendlines along a converging price range. Like pennants and wedges, technical analysts consider them continuation or reversal patterns.
Generally, 3 triangle patterns develop as the price action moves out of holding patterns. These variations include symmetrical, descending, and ascending triangles.
How Do You Trade With a Triangle Pattern in Elliot Wave?
Generally, the Elliott triangle wave has 5 sub-waves named A, B, C, D, and E. Therefore, if you plot your trendline correctly, you should anticipate the end of the last wave.
To determine the end of the last wave, you can measure the length of the third wave. Next, find the level where the last wave will be either 78% or 61% of the third.
You can also draw some trendlines linking wave C and wave A extremes. Most of the time, the last wave will shoot through the trendlines, so you should place your stop loss at the third wave’s extreme.
How to Identify a Triangle Pattern in Elliott Wave?
A triangle pattern Elliott wave is a corrective pattern that consolidates the previous trend. They are composed of 5 waves. But for them to be an Elliott triangle, they have to follow these Elliottwave triangle rules:
- The sub-waves should divide as 3-3-3-3-3: when you zoom in, you should see 3 corrective waves of the 5 waves.
- They must be triangles or multiple zigzags.
- Wave C should never stretch beyond the ending price of the first wave.
- The fourth wave shouldn’t move beyond wave B’s ending price.
- Wave E shouldn’t stretch beyond wave C’s ending price.
Example of a Triangle Pattern in ElliottWave
Triangles appear in the wave 4 position, which is the last wave in a longer sequence. For instance, in an impulse, this wave may appear in wave 4 in a 5-waves zigzag. It can also appear in the second wave in an A-B-C zigzag sequence.