Where to Enter Your Trade? A Triangle to the Rescue!
Dave Green • 1 min read
One of the most popular questions that I often hear from Forex traders is “how do I know when to enter a trade?” or, in other words, how to spot good entry points in trends? As most of you probably know, one method is to look for trend breakouts.
And here is where the triangle pattern comes into the picture. A breakout appears when the price breaks up or down the pattern's borders, and there is no better and clearer pattern to witness this than a triangle pattern appearing on the chart.
Let's take a look first at a real trading example, spotted last week on the Australian dollar- U.S. dollar 15 min chart:
You can clearly spot the price moving inside a triangle, before breaking it up, into a clear, long uptrend.
So far so good. Not too complicated, and potentially, very rewarding. The problem is that in some cases you might see a false breakout. It means that after the price seems to break the pattern into a new trend, it turns back, and goes in the opposite direction.
The best way to handle this is to set your entry at a bit of a distance from the triangle borders (20-30 pips away), and to set your stop loss next to the triangle's vertex (see red dot in the next picture)
In our case, a good experienced trader could have noticed another cool thing: Looking at a wider frame, he could have seen the triangle site on the last key resistance, which dramatically increases chances for this bullish trend to come:
How did it end? With a 65 pips profit, and a couple of hundred Euros in my pocket:)