Symmetrical Triangle Top Bearish Security Pattern

It connects coequal 2-3 peaks and valleys on both support and resistance levels, leading price action to an apex point. This pattern could be bullish or bearish, depending on where price action goes outside the apex. Named because they look like triangles, these patterns connect the beginning of the upper trendline to the beginning of the lower come. The upper line connects the highs while the lower line connects the lows in that security.

1. This bullish symmetrical triangle pattern emerges when an upward trend and a downward trend intersect, forming a distinct triangular configuration.
2. When dealing with a symmetrical triangle, however, it is optimal for price to break above or below the trendlines one-half to three-quarters of the way through the pattern.
3. If the breakout is too gradual, it will appear to just be moving along the edge of the line, making it hard to tell whether a real breakout has taken place.
4. As you can see in the chart below, the pattern is formed during a trend by two converging trend lines that form price consolidation and a ranging market.

Personally, I do not like this strategy, as I feel that the odds are not as good, and it is hard to find many instances of a successful breakout. The probability of a reversal is higher due to uncertainty of the pattern. This means that instead of compressing prices into a fixed breakout point some time within the pattern, this pattern sees prices moving further and further away from each line in the pattern. Price consolidates within the triangle, connecting lower highs and lower lows, hinting at potential downside action. Learn everything you need to know about what the support and resistance indicators are, how to identify them, how to trade them, and their advantages and disadvantages. Traders wait for a breakout to occur and then enter a trade in the direction of the breakout.

What the Symmetrical Triangle Shows Us & What It Looks Like?

Buyers eventually lose patience and rush into the security above the resistance price, which triggers more buying as the uptrend resumes. The upper trendline, which was formerly a resistance level, now becomes support. Connecting the start of the upper trendline to the beginning of the lower trendline completes the other two corners to create the triangle. The upper trendline is formed by connecting the highs, while the lower trendline is formed by connecting the lows.

What is a symmetrical chart pattern?

The bullish symmetrical triangle pattern should be formed in an ongoing uptrend and the prices should breakout from the upper trend line. This is true of any type of trading tool used in this strategy, including triangle chart patterns. It’s important to keep in mind that the market is very unpredictable and can swing in any direction even if these tools can be used to make predictions about trends. If you’re going to use triangle patterns, make sure you take positions only after you confirm a breakout in the price action of the security in question. They can be either a continuation pattern, if validated, or a powerful reversal pattern, in the event of failure.

If the breakout is too gradual, it will appear to just be moving along the edge of the line, making it hard to tell whether a real breakout has taken place. As such, I was unable to find a good chart example, and I have simulated a price breakout instead. For instance, if the widest part of the triangle is 20 points and the breakout occurs at 75, the expected bearish symmetrical triangle pattern move is either a 20-point increase to 95 or a 20-point decrease to 55. Uncover the concept of market disruption, a phenomenon characterized by significant market declines. Understand its causes, from physical threats to policy changes, and its far-reaching impacts. Learn about measures like circuit breakers and enhanced risk management practices.

Stop Loss

In the example above, we see that prices bounce off the lines on both sides, and I have highlighted the potential buying and selling opportunities with green and red arrows respectively. Professional team of writers/analysts analyzing the financial markets. When acquiring our derivative products you have no entitlement, right or obligation to the underlying financial asset. AxiTrader is not a financial adviser and all services are provided on an execution only basis. Information is of a general nature only and does not consider your financial objectives, needs or personal circumstances. Important legal documents in relation to our products and services are available on our website.

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The ideal pattern would have 6 points, three on each side before the breakout. Harness the market intelligence you need to build your trading strategies. From beginners to experts, all traders need to know a wide range of technical terms.

The trendlines should converge towards each other, forming a triangle. The triangle does not need to look „perfect“, but the lines should converge fairly symmetrically. Commodity and historical index data provided by Pinnacle Data Corporation. The information provided by StockCharts.com, https://g-markets.net/ Inc. is not investment advice. The Symmetrical Triangle Top pattern forms when the price of a security fails to retest a high or low and ultimately forms two narrowing trend lines. The price is expected to move up or down past the triangle depending on which line is broken first.

We have a basic stock trading course, swing trading course, 2 day trading courses, 2 options courses, 2 candlesticks courses, and broker courses to help you get started. Our chat rooms will provide you with an opportunity to learn how to trade stocks, options, and futures. You’ll see how other members are doing it, share charts, share ideas and gain knowledge. After the breakout, the triangle’s apex turns into support or resistance, depending on the direction of the breakout. The price can return to the apex point to test that support or resistance before continuing the breakout.

You could also think of it as a contracting wedge, wide at the beginning and narrowing over time. While both the symmetrical triangle and the pennant are continuation patterns with a good degree of reliability, there are two key differences between the two in terms of their formations. If the price breaks out from the bottom pattern boundary, day traders and swing traders should trade with the DOWN trend. Consider selling a security short or buying a put option at the downward breakout price level. To identify an exit, subtract the pattern height from the breakout level to compute the target price. The pattern height is the difference between the highest high and lowest low.

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Understanding Triangle Chart Patterns

Remember, look for volume at the breakout and confirm your entry signal with a closing price outside the trendline. The best triangle pattern trading setups happen when you apply multiple confluent factors around these subtle patterns of triangles so don’t be afraid to think outside the box. In general, the symmetrical triangle pattern could be bullish or bearish, depending on the direction of the trend before the triangle formation and the conditions in the market. But in all cases, technical traders use this pattern to join an existing trend following the breakout point. Many chart watchers believe symmetrical triangles, or other continuation patterns like the rectangular-shaped “flag” pattern, tend to appear near the middle of a sharp selloff or rally.

Connect the lower highs with a trendline; this will represent resistance. Proceed then to draw a trendline connecting the higher lows, which will form the support line. On the other hand, when the price breaks below the lower trendline, it is considered as a bearish breakout. If the instrument is in an existing downtrend, the breakout may suggest the price will continue moving in the same direction.