A Trade A Day

My third installments in my five part series on the patterns I trade is Triangles. Or more accurately, my love of them. Once again, investopedia has an excellent definition of a Triangle.

Academic definitions of triangles aside, what makes them so great?

1. Triangles happen all the time. I don’t think a day goes by where I can’t find a triangle that is ready to pop. Ascending or Descending, triangle occur on multiple time frames. I truly feel that I could trade triangles the rest of my career and have ample trading opportunities.

2. Triangles are easy to see. The triangle formation is very distinct. In the case of an ascending triangle, the trader will see approximately the same highs and higher lows. Price gradually works its way to back to resistance. Successful completion of the pattern results in a breakout to the upside on heavy volume.

Steps to make a triangle work

1. Breakout volume needs to surge. 50 to 100% or more. The more the better.

2. Risk Management. This gets repeated ad nauseam. We all know we need to maintain some semblance of risk management. One other thing to keep in mind is price action after breakout. The Option Addict has an excellent video on managing breakouts. Expect a retest with triangles.

Here’s some triangles for your consideration:

My secret to triangle trading success.

Since you’re still reading this post, I’ll reward you your diligence with my winning triangle formula:

Opening Gap Up + Intraday Ascending Triangle = Profit

Sounds simple because it is. It’s one of those patterns that, over a career, is a consistent winner. Tweak it with multiple time frames and you’ll be in good shape. Paired with sound money management and you’re unstoppable.

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