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When it comes to the technical analysis, it needs to be said that it means considering the price actions as well as structures or charts, more precisely, after which comes the educated guess about the future movements that the price will make in the future period. The name of this action is forecast. However, when it comes to the trading, it needs to be mention that trading actually means forecasting the future movements of the price that will happen in the market. However, it needs to be considered that during the majority of that time, the markets will make the consolidation patterns.
In regards to these consolidation patterns, it needs to be said that one of the most common consolidation patterns is the triangle and that triangle can be contracting as well as expanding. In the case of contracting triangle, it needs to be said that as the name is suggesting it is contracting which means that the waves in this pattern are smaller than the waves in the previous pattern. Besides the contracting triangle, there is another type of the triangle which is called expanding triangle and this type of triangle can be very tricky. Additionally, these types of triangles do not occur that often but that does not mean that they do not exist.
These expanding triangles occur occasionally on the currency markets and all the rules for the triangles that were set up before are respected in the case of expanding triangles as well and some of those triangles are: the legs of the triangle are corrective and the given triangle is traveling on the a-c as well as on b-d trend lines.
Traveling on b-d trend line
In this case, the most important trend line for the triangle pattern is the b-d trend line and at the moment when this trend line gets broken the triangle has been completed. When that type of triangle appears, the waves that are coming in that triangle are reaching new highs as well as new lows in comparison to the wave before. In that case, the trader will be under impression of that the price might actually be breaking in one or the other direction.
The phrase ‘expanding’ in the expression expanding triangle actually implies that the a-c as well as b-d trend line will not meet in any position in any foreseeable future on the right side of the screen. But rather they will meet on the left side because these two trend lines are actually point into completely different directions. In that case, we can conclude that when it comes to the expanding triangle that the coming wave is always bigger than the previous one and consequently, the wave a is the smallest while the wave b is bigger than wave a, the wave c is bigger than the wave b and so on and so forth.
However, this also means that there are several types of these triangles that fulfill the requirements of this category and consequently and considering the specific types of triangles these proportions are subjects to a change. Here is an example. One way in which these things can be considered is the classical triangle and that classical triangle evolves horizontally and it assumes the bullish trend and it acts as a pattern of continuation. In that case, the market will not create any more than three lows before the triangle actually breaks the b-d trend line towards the upside. This is an area that many traders find difficult and with which they have problems with understanding.
In the case of triangles, since each leg is going towards and it taking the highs or the lows in the leg of the previously created triangle, the stops get triggered and when that happens traders will no longer have the opportunity to see or even to know in which direction the price is actually going. Additionally, since we already know that the triangle legs are corrective very complex corrections occur in this case as well. However, it also needs to be mention that the distance that needs to be covered is much bigger than the one that appears in the contracting triangle. All of this, in the end, results with the double or even the triple zigzags formations being formed.
For a trader, this might actually be one of the most crucial information about this issue because these types of patterns are actually sharing one common thing and that is the fact that they channel impressively good and at the moment when that channel gets broken, for example, in the case of bearish downtrend, the trader will get the information that the call options should be activated.
How to identify the Expanding Triangle?
With everything being said, it also needs to be mentioned that identifying these expanding triangles is not easy but it gets easier when you finally get a grasp of the common characteristic that all expanding triangles share. That characteristic is the fact that the a-c trend line in majority of cases gets broken by the e wave. Another way to identify the expanding triangle is to look for the e wave that should be the longest and it will consume the most time because it causes traders to believe that the market will never turn. However, this means that the end of the pattern is coming.
In the case of expanding triangles, it is also possible that the variations might also appear – that might happen in the case of triangles that finish with the higher or lower values than the starting points were. In that case, the pattern will indicate the higher lows than before and with that the rules of the triangle will be broken. However, the triangle is also expanding even in the case when the b-d as well as c-d trend lines are also expanding. Trading binary options with these kinds of patterns might be rewarding to the trader because they enable the trader to draw the a-c trend line and after that wait for the e wave to break that trend line which must happen in any case with the e wave.
When the break happens, it is always good move to trade call options when the bullish triangle appears as well as put options when the bearish triangle appears. In the case of the bullish triangle, put options can be traders as well but by the time when the market is actually taking the highs in the previous wave as long as it is not the d wave. In this case, the statement that the bigger the time frame is the expiration date should be longer as well, can also be applied. Two records dealt with in this piece are presenting the relatively rare triangle, the one that evolves horizontally and the other that is following and respecting all the rules set forth for the expanding triangles as well as for the understanding of that concept.
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