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What is Triangle They Out (TTO) Pattern in The Strat

Published by Ali Muhammad
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Triangle They Out is a broadening pattern that forms during trending market conditions and is used for stop-loss hunting by market makers. It is also denoted by the TTO pattern.
In Strat trading, we use the TTO pattern to our benefit. For example, if you know that market makers are hunting stop-losses, you can follow their actions by opening more trades at the right time and in the right direction. This will increase the risk-reward ratio and help keep the portfolio green.
In this post, I will explain the Triangle They Out pattern in detail, so make sure to read the full article without skipping any steps.

What Is a Broadening Formation?

As we have learned, the market only forms three scenarios, and the broadening pattern is one of them.
A broadening pattern means that as the price moves, it expands, making higher highs and lower lows. A simple example is the formation of an engulfing candlestick pattern.
The price starts from a single point and then continues making higher highs and lower lows until a final big wave forms. Then, another broadening pattern forms with a final big wave, and this process continues.
Look at the image below for a better understanding of the broadening pattern.

Broadening Pattern Structure

We know that the price makes two types of waves: impulsive waves and retracement waves. If you analyze the retracement wave or trend pause on the candlestick chart, you will notice that the price is actually forming broadening patterns. For example, if the price is moving higher, it is moving up and continuously forming broadening patterns.
I have explained this phenomenon graphically in the image below.

Broadening Market Structure

I hope the concept of broadening formation is now clear to you.

What Are TTOs?

During trending market conditions, the price will form minor broadening patterns to eliminate retail traders. These minor broadening formations are the TTOs in Strat trading.

How TTO forms on chart

To identify the TTO pattern on a candlestick chart, follow these steps:

  1. Identify the direction of the main trend, whether it is bullish or bearish.
  2. The first price wave will be the smallest and will form against the major trend.
  3. The second price wave will be bigger than the first one and will make higher highs and lower lows.
  4. The third wave will form opposite to the first wave and will be bigger than the previous two waves. It will also engulf the second wave, making higher highs and lower lows.
  5. The fourth wave will again be larger than the previous wave. The price mostly makes a bigger fourth wave, returning to the original trend. However, in the case of a trend reversal, the price can also reverse to form a fifth wave.
  6. The sixth and seventh waves can also form in some cases, but most of the time, the broadening pattern will stay within 4 to 5 waves in the case of minor retracement.
TTOs Formation

Psychology Behind the Formation of TTO Patterns

In trading, market makers don’t want you to profit from the market. If you’re making a profit, it means another trader is losing.
Market makers trap retail traders by making higher highs and lower lows. Retail traders often place their stop-losses above or below swing highs and lows. Market makers break these highs and lows to grab liquidity. After gathering enough liquidity in the form of stop-losses, they start big trends.

What Can We Do Here?

We can predict the TTOs and ride the big trends created by market makers. This is an opportunity for easy profits.

Importance of TTO

In Strat trading, we can trade the TTO pattern in two general ways:

  • To open more orders in the direction of the trend at each TTO pattern
  • To find the direction and magnitude of a trade

In trading, magnitude means how far the price can go. For example, if you know the price will make a fifth wave and create a higher high, you can hold your trade longer, making bigger profits.
To determine the magnitude of a trade, you can use trendlines. By aligning the highs and lows of a broadening pattern, you can determine the next price target. The price often bounces off trendlines. If we extend the trendlines of the broadening pattern, we can predict future price targets.

Also, if you are already in a sell position, you can open more sell orders at each TTO pattern. I have explained this phenomenon graphically in the trading strategy section.

How to Trade the TTO Pattern?

Trading the TTO pattern is straightforward, but you should not trade it in isolation. Use it in confluence with Strat patterns and timeframe continuity.
For example, if you have opened a sell trade and the price is decreasing, whenever a TTO pattern forms, you can open another sell trade and break even on the previous one. Proper risk management is crucial.

Trading the TTO’s in Strat

As we know, the price usually makes a bigger wave in the 4th, 5th, or 6th wave. For example, if we are in a sell trade and a TTO pattern forms during the bearish trend, we wait until the price makes a Strat reversal pattern at the start of the 4th or 6th wave. This is the simplest way to trade the TTO pattern in Strat trading.

Conclusion

Triangle They Out is one of the most important concepts in Strat trading. It helps increase the risk-reward ratio of a trade. Even if you lose a few trades, your account can still be profitable. This is the main benefit of TTO.

However, there are other benefits, such as determining magnitude and price target levels.

If you have any questions about the TTO pattern, don’t forget to comment below. I will answer all your queries.

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