One of the most simple and clear strategies that can help binary options traders to get oriented in pricing matters is the Triangle Strategy. If the price increases, then there is an ascending triangle, and respectively, if it goes down, we have a descending triangle. Both types are formed in a bearish or bullish market and focus on the dynamics of the market situation. With this strategy you will also identify a balanced and expanding triangle, but the latter is not recommended by experts to use in binary options due to its specific nature.
The Triangle is one of the most popular patterns of classical technical analysis. Despite the fact that this pattern seems simple enough, many traders often make mistakes when trying to interpret triangles. In order to make it a guide that help you draw profit, you need to clearly understand how it is formed and not confuse it with other patterns.
How to build the triangle pattern
To build the triangle chart pattern, select the points on the timeframe that visually stand out. You should do it in the same way as the support and resistance lines are built. Drawing an imaginary line which goes through peaks and lows, we obtain a shape with a top and bottom, and this is our triangle. Based on its shape and projection we can interpret the market behavior and create a strategy.
Types of triangles
Ascending Triangle – it is a figure which visually shows up. As a rule, the upper price resistance line either is horizontal or is slightly looking up, and the bottom line, rising up, forms a sharp angle. In most cases the price breaks through the resistance line , so at this point you can buy the CALL option. If you want to be really clear about this take a look at the image below.
The Descending Triangle is exactly the opposite of the Ascending one. The top line shows a downward trend, but the bottom line stands as a support line and can be positioned horizontally or can go slightly down. In such cases, the logical behavior of the binary options trader will be to wait for a breaking through of the support line and then buy a PUT option on the second candlestick. Now, you know when to buy the CALL and PUT options, but that’s not where it ends. Take a look at the image below to see the complete list of triangles that can be formed by price movements.
As you can see, there is also the symmetrical triangle, which is not so simple. Here the price can break both resistance and support line and the trader needs to be extremely attentive to the price changes and, above all, to assess the risks. The Binary Options experts advise that when the symmetry changes in a way that we don’t like, even in the slightest degree, we have to stop the deal. The strategy says that when such a triangle is formed, you should wait for the breakdown of the support line or resistance line, and depending on this you can buy the CALL or PUT option. Again, to avoid false signals, it is necessary to wait for the opening of the second candlestick.
As you can see on the image with the list of triangles, there is also the expanding one, which we will ignore because it is not a signal for binary options traders. With the 3 triangles shapes described here you have the opportunity to make a real profit. Don’t forget that the Expiry Time of the contract you buy should exceed the candlestick time value by at least 6 times. It would be wise to test the triangles on a demo account before you actually use them on a real account. Get comfortable with identifying them and then go for it!