Trading Triangles

How to trade and profit from triangle patterns right now!

John Piper

• Publisher: Harriman House
• Year: 2012
• eBook ISBN: 9780857192820
• Topic: Business
• Subtopic: Investments & Securities
• Index: Business

In late 2012, the charts of USD/GBP, Gold, the FTSE, the DAX and the DOW are all exhibiting triangle patterns. Breakouts from these patterns are imminent, which presents an unprecedented trading opportunity for the technical analyst - if you know how to spot triangles and trade them.In 'Trading Triangles' John Piper explains how and why triangles form, shows you how to spot a triangle on a price chart, and most importantly how to trade these patterns for profit.There are potentially massive moves on the way in these markets. 'Trading Triangles' is your vital guide to keeping on top of these moves and putting yourself in place to profit.

Appendices

Appendix 1 – Transcript of interview with Dominic Picarda of Investors Chronicle in October 2012

(Note: this transcript has been edited a little to improve clarity.)

Dominic Picarda: Want to know the consensus view where the market is heading in 2013? Looking for some nice, conservative ways to play those views? Well, if you are, then I suggest you turn off right now because today we’re sticking two fingers up to the consensus and telling conservatism where to go.

That’s because my guest today is a man who makes his money from the markets by doing famously bold contrarian trades. This guy has been short selling futures since when I was in short trousers and he might still even have a little more hair than I do.

He’s also the brains behind one of the UK’s most widely read and longest established trading newsletters. John Piper welcome to the show. I’ve been dying to get you on the show for ages. Just quickly about your service first. You do The Technical Trader which comes out monthly.

John Piper: Monthly, yes.

DP: And you do weekly videos and …

JP: We call it the Big Call Service now. I’m really looking for the larger moves of the market rather than the smaller moves although I still day trade. We have trading systems that trade on a daily basis but my main focus for the service is actually longer term. The big stuff that is going to happen.

DP: You use spread bets yourself to trade the market but you used to have been in the futures game of course.

JP: Yes, I started in ’87 when the minimum trading size was 20 pounds a point with one futures contract. It’s very, very different now. A lot more people are involved now because you can start a lot more easily.

DP: And you traded through the crash of 1987.

JP: That’s why my hair fell out. What’s your excuse?

DP: That is why your hair fell out, great. OK. Well I was in school in 1987.

Forex – GBP/USD

DP: OK. So let’s take a look at the charts. We’re going to start with the pound-dollar rate. And this is the pound-dollar chart going right back to what? Beginning of 2008. Big crash here and we’ve been in this massive sideways range ever since. What’s happening here?

JP: Well, it’s a huge triangle. I’m amazed that this chart isn’t more widely seen. Have you seen it before?

DP: Well, yes.

JP: I mean obviously you’ve seen pound-dollar. But have you seen the big triangle? It’s perfectly formed. You got all these documentation of the triangle, one, two, three, four, and five.

DP: So it’s a pretty nice triangle. I mean the triangles usually leave when you’ve got this contracting range, squeezing like that. We get a big break one way or the other. What do you think will happen?

JP: I think all hell is going to break loose to be quite honest because we’ve got all five waves virtually in place. I look at the Elliott Wave Theory a lot so I’m talking about waves. We came down here with this big dislocation from the 2007 high, came crashing down, and the pound was about $2 at the highs.

It came crashing down to about $1.35. We’ve now got one, two, three, and four waves. This is all part of the fit. It’s getting a little bit shaky around here. It did see a false break to the downside at 4 but my target short term is $1.65 which is where the upper trendline is now.

DP: So the top of the triangle. That’s about five cents up from where we are today ($1.60).

JP: And we’ve got a few little buying spikes and maybe we’re going to start moving up and so far we have got an “a”, “b” now and maybe a “c” wave rally now coming in, in the shorter term.

DP: OK. So we’ve got a nice move up there but then we’re really looking for the next big wave or the next big move and is that going to be up or down?

JP: You never quite know with a triangle. In Elliott Wave Theory if you get an initial move down into the triangle and then you get the consolidation, the next move tends to be the same way – meaning to the downside.

DP: That’s across technical analysis generally, it’s not just in the wave principle? So that would imply a big move down and you say all hell is going to break loose. If the world was going to recover and everything was going to be A-OK, we think the pattern was going to go that way. So you’re saying if we go that way, that means the world is not going to be OK.

JP: I think either way has risks. I’m not a fundamentalist. I do occasionally try and pin the funnymentalist tail on the market donkey. It’s how I look at it and I like to rationalise moves. But it’s only a game and, at the end of the day, it’s all about buying and selling, as we all know.

I think we’re going to see a big move and the decision point looks to be at $1.65. At that point, we may well go down big time, and that is how Elliott Wave sees it. Market profile, of course, has a different take on these things. Market profile says once you start to consolidate and you develop like this, then a breakthrough can come in either direction.

DP: Right.

JP: But whatever happens, a triangle is like a coiled spring. In this case a huge coiled spring and after four solid years of triangular action I think we will see something pretty dramatic. This should be a great trading opportunity and we’re getting close now. I would say the next big move could be this year or early next year but that’s the one to watch.

DP: A way to play this then surely would be some sort of options-related strategy where you think there’s a big move coming. You don’t know which way it’s going to be and therefore you’re going to benefit either way.

JP: Yes, you could do that or you could just watch the trend lines. Sometimes you can get very close stops in this kind of move. You can get a situation where you get a break, a retest, maybe a little spike. There are lots of approaches/systems in fact and if you have a trading system that you developed, this might easily give you really low risk entry points into major moves.

DP: OK. So just to summarise, we’re probably going to go up to here ($1.65) and then we will know when the big move comes and there will be enough of it and we don’t have to be getting right on the ground floor because there’s going to be…

JP: I would think this will be something that’s going to be around with us for a while and it could be major dollar weakness. So a loss...

Table of contents

• Cover
• Publishing details
• About the Author
• Introduction
• Section One – What is a Triangle?
• Section Two – How do I Trade Triangles?
• Section Three – Case Studies of Real Triangle Trades
• Section Four – What is Happening Now!
• Appendices