In the context of trading patterns, what is a triangle pattern?

A triangle pattern is characterized as a consolidation pattern with converging trend lines. This is correct because as the price moves within these converging lines, it often indicates indecision among traders, leading to a potential break out or break down. The formation consists of a series of highs and lows that taper towards a point, which is why it is depicted as a triangle.

This pattern is significant because it usually precedes a continuation or reversal of the previous trend, providing traders with insight into potential future price movements. The convergence of the trend lines signifies that the market is losing volatility, and as the pattern resolves, it can lead to a clearer direction when the price breaks out of the triangle. Understanding this concept is essential as it can offer trading opportunities based on how the price behaves when it breaks out of the triangle formation.