Ever wonder how you can avoid trading mistakes?

Maybe yes or not whatever you are in, there are so many ways to get rid of this dilemma.

One of the best ways is technical indicators. It indicates what the next turn will be and what action you have to take. Into the so many technical indicators,  Triangles are the most beneficial of them and contracting and expanding is both the key factor of it.


In this article, we will talk about contracting triangle patterns and their categories. What do you want to say?

Be quiet, let's start the show!

WHAT IS A CONTRACTING TRIANGLE PATTERN?

A contracting triangle is characterized by five different points or legs of a triangle which connects a to c and b to the d trend line, and it will end in a common point in the future. It will show the volatility of the market trend.

There are some categories of the contracting triangle pattern which shows the different angles of triangle patterns.

HORIZONTAL CONTRACTING TRIANGLE PATTERN

 


This pattern is a similar triangle pattern in the contracting pattern. In this pattern, every wave is smaller than the previous one and that's why it's the contracting triangle.

The very definition of such a triangle is, therefore, a> b> c> d> e. The name of such a triangle comes from the fact that it is evolving on the horizontal and, starting from its beginning, the price will form a series of ups and downs around that level until eventually, they will break higher or lower.

Horizontal contracting reveals when the b wave of zigzag or as the fourth wave turns into an impulsive wave.

IRREGULAR CONTRACTING TRIANGLE PATTERN

 

 

An irregular contracting triangle pattern is commonly similar to the ac and bd trend line points. But there is the difference that a wave is smaller than the b wave.

The patterns will show only when wave c is completed. Both evolve similarly to a horizontal triangle. While a horizontal triangle is pretty common, an irregular contracting triangle pattern appears in most cases in the forex market.

Well, it's quite a smart move, this pattern shows the fake side that attracts traders from the wrong side. 

RUNNING CONTRACTING TRIANGLE PATTERN

 


This pattern has a special fact that its endpoint will be above (while the market is bullish) or below (when the market is bearish).

Overall, this triangle pattern means it will run until the triangle is broken and the bd trend line is the one that holds the key for any entry. In this triangle, the d wave is bigger than the c wave like the b wave is bigger than a wave.

In running the contracting triangle pattern, you can find the b wave is the longest one of all waves and the d wave is the shortest one.


THE OUTCOME

Mostly it can be said that the contracting triangle patterns are used to find the most volatile market trend. These FIVE waves show the pattern more effectively. 

These patterns are known to experience early breakouts that give investors a "head fake." Therefore, do not forget to look for volume at the breakout and confirm your exact entry signal with a closing price outside the trendline.

Source :  WHY CONTRACTING TRIANGLE PATTERNS ARE EFFECTIVE IN ONLINE TRADING?