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In terms of chart patterns, one of the more common ones you'll see out there are triangles and really
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what's happening with there is there's a convergence of a support and resistance levels.
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So think of it again.
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I think of support levels as prices don't go below a support level, they're bouncing off the bottom.
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There's a level where they're not breaking through or going lower and a resistance level, the high
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part of prices where prices maybe are marching up to a resistance point, but they don't break through
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that resistance.
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They kind of turn around and start coming back down and they're trading between these support and resistance
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level.
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But with a triangle, you know, these things are starting to come closer together.
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They're converging as what's happening.
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And they could be there in a rising or declining prices.
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You know, the trend could be either going upward or downward.
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And so what's happening is the trading price range is starting to converge or narrow.
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Maybe we started out here and then it's starting to get narrower here and it actually forms the shape
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of a triangle.
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And you'll see it in the upcoming lessons here.
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And then what happens is the breakout when it breaks through one of those lines, either a support level
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or resistance level, when it actually breaks through those and then starts going going further in either
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direction, whichever way it's going to go, it usually will break in the direction of the original
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trend with a triangle that's very important.
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You'll break in the original direction of a trend with a triangle.
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So if the original direction, let's let's say upwards and the triangle forms and starts to converge,
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then if it's if it's an upward trend, break through that resistance level at the top and then break
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through to higher prices because an uptrend is higher prices.
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So if we bought here and we're starting to see a nice uptrend in a triangle forms, you know, that's
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a nice that's a nice pattern to kind of stick in there and let it break through.
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That's that resistance level and we'll be seeing that.
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So because think about again, this chart patterns go with triangles.
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They are continuation patterns.
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And that's why you'll follow whatever the way that original trend is, either upwards or downwards,
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because it is a continuation pattern as opposed to a reversal pattern, which would go the opposite
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way.
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But these are continuation patterns, as you'll see in here.
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Look at, let's say, not at the very beginning, but kind of started the middle.
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Do you kind of see if you look at the highs and the lows, you know, if we were to draw lines connecting
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those high highs and those low lows, you know, does it look like it's headed in a certain direction?
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Does it look like a triangle is forming?
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And it's not like, I believe the word isosceles triangle.
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All the sides are equal, you know, be more of a quality boy.
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It's been a long time since I talked about that.
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But the idea is that a triangle is forming here and you see it.
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Well, let's let's put in those resistance and support lines here and now.
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Hopefully, you can see, you know, the triangle as it is.
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It's forming here.
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And and you can see that higher highs were not me, but the uptrend is going to continue on this.
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So and the prices don't reflect new lows either.
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They're trading within that resistance and support line.
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Those those lines up there.
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And you can see how they're converging together.
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They're getting closer together.
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So if we start the far left or the triangle or that dotted line is and then you can see how the prices
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went up to that resistance line but didn't keep going with the uptrend, didn't keep going.
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It turned around and went back downward.
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So now it's going downwards.
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And then it hit that support line.
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But it didn't break through there either, then turned around and went back up.
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And there's always ups and downs as you go throughout, but then march back up to that resistance line
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and so on and so on with multiple touches.
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And you can see how the trading range zero.
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So that is was called an ascending triangle ascending because that's an upward trend in the in the triangle.
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The bottom line, that support line is going sloping upwards where the resistance line is more is more
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horizontal there.
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So that's an ascending triangle, which is a continuation idea.
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And so when you buy on this, so you're buying when it's getting to that low, it's getting close to
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that support line.
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Right.
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So you're you want to let the trend develop.
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You want to let the triangle develop.
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That's the key thing with patterns.
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You don't want to say, oh, I first saw it, you know, hit that first that first touch of that line.
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And by then, we don't know yet whether that's going to kind of reverse around.
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So typically, you want to buy in like the second or third touch of a support line.
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And the more touches a support line has, the more approaches or close or near touches it has, the
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stronger the indicators that that trend is holding, that those price levels are holding and and becoming
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more predictable.
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In this case.
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We've got you can see where we started to the far left, kind of where the dots are.
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And we got one, two, and look at the third one where it's approached.
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And once it makes that turn away from that at the third one, that's when we buy it.
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So that's a very strong confirmation.
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You can also use a second indicator to further confirm, you know, with with volume or a moving average
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or some other type of care to help you confirm as well.
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You don't have to trade just off the triangle.
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You could you could buy on that second touch, by the way, in.
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That's perfectly fine.
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The third touch just gives you a little bit more confirmation.
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You know, the more touches, the more confirmation.
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And the idea is we bought there on that third touch.
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It went up a little bit, actually, then came back down and then touched again for fourth time, then
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went back up again.
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But you can see what that support line that we've established, that support line, the third touch
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to help support that support line, and then it actually reinforced with the fourth touch there and
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then the prices went up and you can see our profit between where we bought.
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And then if we want to sell at the top of that resistance line, we could or if we wanted for it to
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turn back around again, we could hope for another touch, that support line.
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But we've seen this ascending triangle.
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You see how everything's getting narrower, the price range.
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So now it's getting a little bit more closer as far as will it turn around or will it resist, Will,
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to break through that resistance line or if it goes back, will break through the support line because
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the triangle is converging, it's getting narrower.
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That's the whole idea of the pattern.
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And that's in because it's a continuation pattern.
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We have a better chance of the breakout, of course, happening.
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And the whole idea is it's going to break out on the top end because this is ascending triangle.
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Prices before were rising and then they got into this triangle pattern where they went up, they went
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down, they went up, they went down and then started to converge.
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And as they got tight and converged, then somebody had to win the pulse of the bear.
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Someone had to win and it had to break or resistance line or support line one time.
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And since triangles are considered continuation patterns, your breakout is going to be in the direction
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of whichever way the trend was.
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And the previous trend was an uptrend in this example or in ascending triangle.
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It is always a breakout to the higher end because you can see the support line has an upward slope to
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it.
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So that's where your breakout is now in a descending triangle.
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It's the same concept, just the other direction.
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You see how our support line now is horizontal and our resistance line has a slope and it has a downward
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slope in a downward trend leading into it.
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But again, it's a continuation trend.
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So the lower lows are not made, but the down trend will continue as it trades within that.
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And the Convergys in there.
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But but the prices are not making new highs either.
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The prices are starting to narrow and get closer down.
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So really to tell whether it's ascending or descending triangle, you'll look at which which line is
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horizontal, basically straight across in which one has a slope ascending.
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Going higher would have a resistance support excuse me, that's upturning and a descending triangle
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would have a resistance line that's down trending downwards sloping.
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So if you own let's say if you own something, you might not buy or sell your holdings depending where
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you're at within the triangle.
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If, let's say, I had bought earlier in the in the there was down trending, but I had bought earlier
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and I had worked starts coming back up within that triangle.
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I might try to sell near the resistance line really to just get out is the idea, because again a trend
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is going to start, it's going to keep getting lower each time.
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A good balance is between that resistance and support line, the prices are going to keep getting lower
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until eventually they break through and they break through and they're going to break through in the
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direction of the trend.
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So anything can happen, some kind of unusual event, things can happen, something that, you know,
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there would be that would break the pattern that way.
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But it's following the normal pattern.
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It's going to break out to the downside because that's where the original trend was.
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And you can even see within the triangle how it's converging towards the downside.
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It's good.
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Prices get lower and the range gets more narrow as we go down.
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So break out to the downside.
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So when you see a triangle forming, the first thing to identify is, is ascending triangle or is it
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ascending or is it a descending triangle?
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And then you can base your trades, you can watch that, let it form.
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You can be sure traits around it again with the other triangle type, you want to at least touch or
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get near that that line.
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It's approaching at least two times to help confirm that this is a real pattern.
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That's that's information that's in development.
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A third touch is even better.
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And the more touches you have in general, you know, the more formed the pattern is that you might
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be missing out a little bit if you wait too long.
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So usually like a second and certainly a third touch is a good recommended best practice when you're
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trading within many of these chart patterns or almost all of these chart patterns, but certainly with
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triangles.
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