According to K. Murphy, there must be at least 4 strong points in each of the triangle patterns – it’s the minimal stipulation. As the reader should already remember, 2 points are always necessary for drawing the trend line. Consequently, as the reader should remember, in order to draw two trend converging lines, each of them must pass at least through two points. As it is depicted in Chart 6.1a, the triangle pattern originates at the #1 point – i.e., where the ascending tendency consolidation is formed. Prices fall down to the #2. Further they rise up to the point # 3. Oddly enough, but the point # 3 is located lower than the point # 1. The trend upper line can be drawn only after the price fall down from the level of the point # 3.
What’s striking, the point # 4 is located on a level higher than the point # 2. The lower ascending line can be plotted only after the rise in prices up to the point # 4 level in the course of the market recovery (revival). Just after this moment the annalist can start being suspicious that he deal with the triangle pattern. So, one gets 4 reference points (## 1, 2, 3, 4) and two converging forex trend lines.
There is a signal of the pattern coming to the end. It corresponds to the price of closing going beyond one of the trend lines.
One can see an example of the ”bull” symmetrical triangle pattern. One should pay attention to the 2 converging lines. The pattern comes to the end when the prize of closing becomes stabilized beyond any of 2 trend lines. The vertical line on the left depicts the pattern bottom. The point on the right is an apex – there two lines converge.
False signals of the symmetrical triangle pattern
J. Murphy just states (ascertains) that the frequently-occurring (abundant) false breaking through the symmetrical triangle pattern is of no use in the following situations:
· To explain the reason and nature of the false breakdowns.
· To find a filter that could select false breakdowns false breakdowns and indicate the true breakings through the symmetrical triangle levels.
J. Murphy just verifies the abundant fact of the false breaking through the symmetrical triangle. At the same time, this author
* cannot explain the nature of such false breakdowns and their origins;
* cannot find a filter that could eliminate false breakdowns and detect true ones – the true breaking through the symmetrical triangle levels.
As J. Murphy mentions, it is difficult to explain why “bull” triangles sometimes generate false “bear” signals – earlier than the ascending tendency starts to recommence. Often the signal is detectable in the vicinity to the pattern apex. This fact indicates that the tendency has gone to the right too far.
According to J. Murphy, there are two techniques of working with the symmetrical triangle.
- The simplest way is the following. First, one should measure the height of the pattern (the bottom) in its widest section. Further, this distance must be upright depicted – to start either from the breakdown point or from the apex. In Chart 6.2a, one can see an example of the projection of this distance referred to the breakdown point. J. Murphy emphasizes that he personally prefers this very technique.
- The second technique consists in projecting the trend line - to start from the bottom apex (A- point) and in parallel to the trend lower line. The channel upper line plays the role of uppermost orienteer under the condition of the ascending tendency. In a new segment of the rise in prices, there is a tendency towards returning to the angle of the previous ascending segment of the tendency (it is fixed before the triangle formation). Taking all these factors into account, one can approximately find out the time orienteer of the price approaching the channel upper bound – as well s the price orienteer itself.
Chart 6. 2b. It’s an example of a symmetrical triangle as the tendency reversal pattern. In October, 1983, the breaking through the lower line indicates the appearance of the basic descending tendency. One should notice another small symmetrical triangle. It is located within the coordinates 7.00 – 8.00 in this Chart. The second triangle indicates the “bear” tendency continuation.
C. Luca has written about the symmetrical triangle the following.
One can regard triangles as pennons without the staff. That is, their price reference points are located nearer than the pennon price reference points. As the triangle has no staff, such models occur more often – for their formation, a smaller movement in prices is necessary. There are 4 types of the triangles: symmetrical, ascending, descending and extending ones.
The symmetrical triangle is restricted by the symmetrically-converging lines of support and resistance. This pattern is characterized at least by 4 points of importance. In Chart 3.9, one can see the line of support, prescribed by the points B and C. The line of resistance is prescribed by the points A and C. There are 2 techniques of determining the triangle price point of reference
- by making the vertical projection of the triangle AB bottom width starting from the breaking point D.
- it can be regarded as the level of the price intersection with AE-line, parallel to the line of support BC.
However, both these approaches can yield different price orienteers. The breaking through the triangle is possible in any of the 2 directions.
Chart 3.9. An example of the typical “bull” symmetrical triangle.
Chart 3.11. An example of the typical “bear” symmetrical triangle.
The questions brought up for discussion by Masterforex-V Trading System.
1. Does there exist the 3rd method of measuring the direction and goals of the movement in prices under the condition of breaking through the triangle?
2. Besides the slanted channel projections, what else can serve as the goals (orienteer) under the condition of the breaking through the resistance slanted channel?
The approach to the triangles according to A. Elder
A. Elder has substantially contributed to the theory developed by J. Murphy.
1. A. Elder has divided the triangle into inner sections. As a rule, a not-large triangle (of the height 10-15 % of the previous trend) makes a pattern of the continuation. A great number of ascending and descending trends are portioned by such triangles – as phrases are divided by comas. Usually the large triangles (of the height 1/3 and more of the previous trend) indicate (make) reverse changes. At the end, some triangles go into the usual (standard) price corridor.
2. A. Elder has divided the triangles in accordance with the angle of slope (tilt angle). The triangles can be subdivided into the 3 large groups. The upper and lower lines of the symmetrical triangle are characterized by the equal slant. If the upper line is slanted by 30 degrees with respect to the horizontal, the lowest line is tilted by 30 degrees as well. The symmetrical triangle depicts the equality of the “bull’s and ”bear’s strengths. Much more probable, the triangle indicates the trend continuation.
The ascending triangle is characterized by respectively- even upper bound and the lower bound ascending. The flat upper bound indicates that “bulls” preserve their strength. They can raise prices up to the same level. At the same time, “bears” are getting weaker. They cannot drop the prices as low as it was done before. It’s most probable that the ascending triangle is concluded with the up-wards directed breakdown.
Chart 14. The triangles
Each of the triangles is formed by two converging lines. The upper one connects at least two maximums – or more. The lower line connects at least two minimums – or more.
The ascending triangle is the one characterized by the increasing lower bound. It indicates that one should expect the upward-turned breakdown. The descending triangle is characterized by the falling-down upper bound. In its turn, this pattern indicates that, most probably, prices will fall down. The symmetrical triangle indicates that strengths of “bulls” and ”bears” are get balanced. Most probably, the trend will continue.
3. This author has determined the area the heavy breaking through the triangle – up to 2/3 of its length.
As a rule, the true breakdowns occur within the first 2/3 of the triangle length. Sometimes after the breakdown prices return into the triangle again. Such recoils ensure perfect points of starting the game towards the breakdown direction.
The descending triangle is characterized by the relatively-even lower bound, the upper bound tending downwards. The even lower bound indicates that ”bears”, preserving their strength, make prices to fall down to the previous level. Simultaneously, ”bulls” become weaker. Now they cannot rise prices as high as before. It is a high probability that the descending triangle pattern can result in the descending breakdown.
The trading volume tends towards decreasing as the triangle is ageing. If the trading volume increases as prices are rising, the upward-turned breakdown is more probable. If the trading volume increases as prices are approaching the minimum, the downward-turned breakdown is more likely to happen. The true breakdown is confirmed by a splash in the volume – at least by 50% of the average value during the latest 5 days.
It’s already mentioned that, as a rule, the true breakdowns occur within the first 2/3 of the triangle length.
4. A. Elder has determined the possible area of the triangle false breakdown.
This author doesn’t recommends to gamble within the last 1/3 part of the triangle. If prices are stagnating the whole path up to the point of intersection, most probably, they will remain constant.
You can discuss the chapter with the Academy members by following the link
Chapter 1. Trend definition in the Masterforex-V Trading System >>
Chapter 2. Levels of resistance and support in Masterforex-V Trading System >>
Chapter 3. Actual and false breakout of the resistance and support level. Rebound from technical level.>>
Chapter 4. Technical levels of Forex by Dow Jones agency. >>
Chapter 5. Pivot point of currency pairs >>
Chapter 6. Slanted Channels, as a tool of the Forex market analysis >>
Chapter 7. Opening of positions when using Slanted Channels >>
Chapter 8. Slanted channels in the Masterforex-V trading system >>
Chapter 9. Classic figures of technical analysis - Trend Reversal >>
Chapter 10. Classic figures of technical analysis - Trend Reversal (ending) >>
Chapter 11. Technical analysis - patterns of continuation of trend - rectangle >>
Chapter 12. Patterns of continuation of trend - Gaps >>
Chapter 13. Patterns of continuation of trend - flag, pennant and wedge >>
Chapter 14. Models of the Forex technical analysis - triangles >>
Read more:
Chapter 16. Ascendant and descending triangles - secrets of the strong signals for opening the positions >>
Chapter 17. Expanding triangle - unresolved problems of classics of the Forex technical analysis >>
Chapter 18. Trading On News: mistakes and unresolved secrets of classical analysis >>
Chapter 19. Trader's code of good practice by news under the Masterforex-V trading system >>
Chapter 20. Ally pairs: which gauge at forex is the most unbiased (impartial) and precise. >>
Book 3. Points of opening and closing of positions at the Forex market (basic course) >>
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