# Triangle Pattern

### Video Transcription:

Hello, traders. Welcome to the Elliott Wave Theory course and the second module, Elliott Wave Patterns. In this lesson we’re going to go through triangles and we are going to learn what triangles are, how many waves are inside a triangle, and how many kinds of triangles there are inside of the Elliott Wave Theory.

Now, let’s start by defining what a triangle is. A triangle is a formation that occurs in a position prior to the final actionary wave in the larger degree pattern. Now, this is very important, guys, because you’re not going to go out there just looking for triangles on your charts without knowing where to look for them, okay? So this is very important. A triangle is always prior to the final actionary wave in the larger degree pattern.

This means that you will find them in wave four of the basic five wave pattern or wave B of an ABC pattern, or the final wave X of a sideways combination. Always look for triangle or triangles at…prior to the final actionary wave of the larger degree pattern. Okay? This is important. The reason is because [price?] tends to contract inside of a triangle which means that when the triangle completes and breaks, you are going to have an explosive move either to the upside or to the downside, making it the final actionary wave of the pattern…of the higher degree pattern, of course.

The triangle pattern contains five overlapping waves that subdivides, three, three, three, three, three and are labeled A-B-C-D-E. This means that we are going to find five waves inside of a triangle. Always five waves inside of the triangle, and each wave is going to be subdivided by five, or each wave will contain three sub-waves. This is why we subdivide three, three, three, three, three, and we label A-B-C-D-E.

Now, there are three varieties of triangles. First, we are going to look at the contracting triangle, and this is how a contracting triangle looks like in a bull market and in a bear market. Remember that these are continuation patterns. I’m sorry, so here you can see that a price is going up and then we have wave A, B, C, D, and E before price continues to the upside. The same goes for the bear market or bearish contracting triangle. We have wave A, B, C, D, E and then continuation of the move to the downside. Inside of each wave we have three sub-waves. This is why we subdivide our three, three, three, three, three and we label A-B-C-D-E.

Now, a contracting triangle is defined by a decline in upper line and a rising lower line. Price constructs inside of the triangle and then at point E, price breaks with it in a continuation of the larger move. So this can be wave four of the overall one, two, three, four, five pattern. The second kind of triangle is a barrier triangle. This is how a barrier triangle looks like in a bullish market and in a bearish market. You can see that it is defined by an outer line flat, and an inner line sloping with larger trend. This means that in a bullish/bearish triangle we are going to have a flat top and a rising lower line that rises with the trend, and in a bearish barrier triangle we are going to have a flat bottom and a declining line that declines with the trend.

Of course, we’re also going to have an A-B-C-D-E before the continuation explosion of this resistance, and an A-B-C-D-E before a break-out of this area of support, which is the flat bottom of the triangle. Last but not least, we are going to find expanding triangles. Expanding triangles look like this in a bullish market and in a bearish market, and they look like megaphones. This is the other way to call them, because of how characteristic they are, with an upper line rising and a lower line declining.

Of course, we have the three subwaves inside every single wave and an A-B-C-D, which the E, consisting of our buy point and an A-B-C-D-E megaphone on a bearish market, which means that our point E will be our power sale zone. This is all the triangles that you are going to find. But remember, it’s very important to look for them prior to the last actionary wave of the larger degree pattern. If you are looking at five basic…or a basic five wave pattern, you have to look for this triangle at wave four before, and the point E is going to give you the buy point for you to trade wave five or the pattern.