The Powerful Symmetrical Triangle Pattern

That rally also represented a bullish break from years-long horizontal resistance. Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries. As a former professional trader in private equity and proprietary funds, he has over 15 years of market experience, and has been featured on more than 20 occasions in the media. Hence, it is better to avoid taking a position when prices are in the middle of the pattern, and instead wait till there is a good setup.

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2. Traders would enter a long position when prices break out of the apex, with a close below the apex level as a stop.
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4. Also, since it neither exhibits higher highs and higher lows (uptrend) nor lower highs and lower lows (downtrend), this makes it hard to pinpoint the current trend.
5. For example, if the aforementioned security breaks out from $12 on high volume, traders will often place a stop-loss just below $12.

As a technical analysis technique for trading, symmetrical triangle patterns may be used to spot future price breakouts and trend changes. This pattern is assembled by two converging trend lines, with one representing the highs and the other the lows of an asset’s price. Experienced traders observe this pattern to anticipate a potential price movement, which could either be a breakout point to the upside or the downside. The Symmetrical Triangle Reversal Pattern is a pivotal concept in the world of technical analysis, offering valuable insights for traders and investors. This pattern manifests as a continuation pattern after a strong trend, and it indicates an imminent reversal in the asset’s price direction. It is characterized by two converging trend lines, forming a symmetrical triangle shape, indicating a period of consolidation and uncertainty in the market.

A symmetrical triangle pattern is a technical analysis tool characterized by converging trend lines, signaling a potential price breakout after a period of consolidation. Once we have identified the symmetrical triangle pattern on a chart, we are waiting for a breakout/down to occur. Similar to other breakouts/downs, there are two options to enter a trade. First, you can enter into the market as soon as the candle on a high time frame chart (at least 4H) closes above or below the triangle.

To trade the descending triangle, first identify the key components – a series of lower swing highs along a descending downtrend line and flat support where lows hold steady. A daily close above $0.60 resistance would imply bearish symmetrical triangle pattern 15% upside toward the July highs. But failing to hold above-key $0.55 support risks a steeper 15% drop to $0.46. This means that instead of a breakout, we can look for a low-risk entry point for our first entry.

Differences between a Symmetrical Triangles and Pennant Patterns

The wait is nearly over to see whether bulls or bears will emerge from this technical standoff. There are two methods of trading this pattern and it depends on your trading style. AxiTrader Limited is a member of The Financial Commission, an international organization engaged in the resolution of disputes within the financial services industry in the Forex market.

If the price breaks out to the upside of the apex point, then it’s bullish. The easiest way to draw a symmetrical triangle is by using the drawing/technical analysis tools. These trend lines converge to make the apex point of symmetrical triangles. The minimum target is equal to the vertical height of the ascending triangle, https://g-markets.net/ but extensions are common. Manage risk by trailing stops higher as the breakout continues and close out positions if prices fall back below the resistance level which should now act as support. Target a move equal to the widest distance across the symmetrical triangle chart pattern for the minimum breakout objective.

So if an uptrend precedes a symmetrical triangle, traders would expect the price to break to the upside. A symmetrical triangle is composed of a diagonal falling upper trendline and a diagonally rising lower trendline. The consolidation phase is marked by multiple tagging of the two trend lines on both sides, as the buyers and sellers attempt to break the triangle. Finally, the sellers are able to push the price action below the triangle as two converging lines almost touched.

A stop-loss will be placed at the highest level before the triangle was formed (around the 50% Fibonacci level). XRP shows a bearish divergence between lagging price action and its downward-sloping relative strength index (RSI). The momentum gauge also resides below 50, signaling to strengthen downside momentum. And as you can see in the yellow circles, when prices are in the middle, they can “look” like they are breaking out in one direction, and make a 180 U-turn just a few bars later. This can be done by taking the maximum height of the triangle, and projecting that distance from the breakout point.

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In this example, the symmetrical triangle acts like a continuation pattern that simply helps to extend the downtrend further lower. Imagine a symmetrical triangle pattern as a quiet tug of war between buyers and sellers, where neither side seems to gain ground easily. The market fluctuates within the converging trend lines, resembling a coiled spring ready to release its pent-up energy. A descending triangle is an inverted version of the ascending triangle and is considered a breakdown pattern. The lower trendline should be horizontal, connecting near identical lows. In the EUR/GBP 30-minute chart above, we can see the price consolidation phase following a bullish movement.

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The height of the triangle is commonly used to estimate a potential price target for the breakout. Yes, we work hard every day to teach day trading, swing trading, options futures, scalping, and all that fun trading stuff. But we also like to teach you what’s beneath the Foundation of the stock market. The bias of a symmetrical triangle is typically the continuation of the current trend that’s in place. Think of the lower line of the triangle, or lower trendline, as the demand line, which represents support on the chart. At this point, the buyers of the issue outpace the sellers, and the stock’s price begins to rise.

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What we really care about is helping you, and seeing you succeed as a trader. We want the everyday person to get the kind of training in the stock market we would have wanted when we started out. The second high should be lower than the first to make the upper line head down. The second low should be higher than the first, increasing the lower line.

HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets. We have no knowledge of the level of money you are trading with or the level of risk you are taking with each trade. When this happens, traders look for the price level at which both trend lines intersect, which serves as a breakout level. There are so many stocks in which this chart pattern is formed and it is difficult for traders to look at the charts of more than 500 stocks for finding this pattern.

After a recent swing high, the market starts making the lower highs, while on the other side of the market we witness the higher lows. Hence, this consolidation phase within a downtrend is formed within the symmetrical triangle. Two converging lines are moving to each other as the market makes the lower highs and the higher lows.