How to trade a contracting triangle?
When it comes to trading the contracting triangle, there are a few things that you need to know to use this strategy. First, you need to understand a contracting triangle and its formation.
Essentially, a contracting triangle is created when the price action of an asset starts to contract or ‘squeeze’ into a tighter and tighter range. This range-bound price action typically forms after a significant move higher or lower, and it signals that the market is losing momentum and that a reversal may be imminent.
The two main types of contracting triangles
There are two main types of contracting triangles:
Bullish contracting triangle
A bullish contracting triangle forms when the price action is squeezed into a tighter range following a significant move higher. This type of triangle typically forms during an uptrend, and it signals that the bulls are losing steam and that a reversal to the downside may be imminent.
Bearish contracting triangle
A bearish contracting triangle forms when the price action is squeezed into a tighter range following a significant move lower. This type of triangle typically forms during a downtrend, and it signals that the bears are losing steam and that a reversal to the …
Continue Reading