Triangle patterns happen to be one of the most common, and mistakenly used chart pattern. Many investors see a triangle with its breakout and incorrectly invest based on that breakout. This is a very common practice that is far from correct. There are three basic triangles. Knowing the shape of these triangles will tell you whether or not the breakout is bullish or bearish.

Symmetric Triangle

The Symmetrical triangle forms when there are consistent lower highs with consistent higher lows. Because it is a symmetrical shape, they can serve as either a trend reversal or continuation indicator.

For a bullish sign, look for an upward breakout outside of the triangle.

For a bearish sign, look for a breakout below and outside of the triangle.

AscendingTriangle

The Ascending triangle is formed when the highs remain fairly the same, but there are higher lows. This is a bullish signal. We like to remember the ascending triangle as a bullish signal by remembering that ascending means upward, and bullish means upward.

Since this is a bullish signal in either an up or down trend, look for a breakout above the triangle.

DescendingTriangle

The Descending triangle is created with equal lows, and lower highs. Since it is a descending triangle, we remember it as a lowering or bearish signal.

Since this is a bearish indicator, we look for a breakout below the triangle.

One of the most important things that many traders forget to do when noticing a triangle pattern on a chart, is to look for a confirmation of a trend's strength. If it is a strong trend, we can assume it is an organic triangle. If it is a weak trend, it is a false triangle generated randomly through volatility...99 out of 100 times.

To confirm the trend's strength we use the ADX indicator.