Triangles and wedges in the CFD trading business can help traders to predict the approaching condition of the industry. Both of them show different designs, but their importance and mechanisms are similar.
During a sideways movement or when the market is consolidated, an investor can easily observe a wedge or a triangle. To have a better and clearer view, beginners should choose a smaller timeframe to understand it. Since the triangle and the wedge are related to one another, you can draw the wedge first. To draw the wedge, connect the lower lows with a trend line or the higher highs with another trendline. Thus, an investor can get a clear idea about the wedges.
A triangle can be drawn when the bottom and the top trendline intersect a point. A newbie can easily see that the intersection has given rise to a triangular area. However, in the wedge, the trendline will not be continuous because the price will breakout to either side before the lines intersect. Feel free to look at this site to learn more about pattern trading method.
How can you draw the triangle and wedge?
Many people become confused at this point. To realize the basic difference among these two strategies, concentrate on three things, the trendline of lower lows, trendline of higher highs, and breakouts.
To form an ascending triangle, draw a trendline using lower lows and resistance levels. When they intersect one another, it is called an ascending triangle. To form a descending one, draw the trendline using higher highs and support levels. If the lines intersect, it is a descending triangle. If the trendlines from higher highs and lower lows intersect, then it is called a symmetrical triangle.
Similarly, you may notice three types of wedges – ascending, descending, and symmetrical. Ascending wedge forms during the uptrend, when the currency’s value increases. The only difference from the triangle is – the breakout. Previously, we have drawn another trendline across the resistance value, but in this case, because of the breakout, we can’t add a trendline across the resistance level.
In the case of a descending wedge, the entire graph and its situation will be opposite to the ascending process. This wedge is seen when there is a downtrend. Instead of selling the currencies, buyers buy once the above or top section provides the path to doing so.
Use the structures to increase the win-rate
You can use these triangular and wedge indicators to enhance his win-rate in CFD trading. Many people in the Mena region spend their valuable time just staring at the charts to find a potential opportunity to trade. Interestingly, you can use the indicator to improve your trading skills. The triangle is indeed a special kind of chart pattern.
Based on the types and designs of the pattern, you can quickly identify the reversal of an existing trend. For instance, if a trader notices that a pattern is taking its place after passing a series of bearish or bullish flow, there will be a reversal. To determine whether the graph is going to continue its flow or is about to take a reversal move, you should adopt a few other technical indicators to take logical action.
Why do these patterns work?
Remember that during a strong movement in the chart, it rarely falls suddenly. It becomes very volatile at different times because of the investors and the times they enter the market. In this currency exchange industry, a retracement will take its place after the primary trend. If the beginners notice, they will see that the patterns form during these periods. It is said that these designs can aid a newbie in calculating the risk to reward ratio, the possibility of making profit, the possible reversal, etc.
Forex experts advise that novices practice using their trade account (demo version) before jumping into real live trades. This practice will improve their intelligence and skills. As a consequence, they can learn to identify the approaching flow.