The Powerful Symmetrical Triangle Pattern

If one of the lines slopes at a higher angle than the other, it suggests that there is an imbalance between buying and selling pressure. For instance, if the upper line comes in at a significantly higher angle of attack than the lower line, it shows us that bears are stronger than bulls, and the other way around. Insights like these can then be used to gauge the likelihood of a breakout occurring to the downside or upside.

A breakout is when the price action breaks above or below one of the trendlines that make up the triangle. This move signals that the consolidation period is over and that prices are about to start moving in a new direction. The breakout strategy is the most common and involves taking a long or short position when the price breaks out above or below the trendlines.

Once you have identified this chart pattern in the stocks, you can trade accordingly as discussed above. For example, the Relative Strength Index is used with the symmetrical triangle to estimate when the stock has become overbought after its breakout. The Symmetrical triangle works best with other chart pattern analysis. This pattern indicates a phase of consolidation before the prices breakout. Price action reverses direction from the first resistance (1) and goes downwards till it finds the first support (2), which will be the lowest low in the pattern.

Identifying the real breakout

In a downtrend, price action finds the first resistance (1), which will be the lowest low in the pattern. So, the triangle height can be obtained by simply measuring the price distance from the highest to the lowest price point within the triangle formation. The default definition of the symmetrical triangle does involve that the volume should be falling as the pattern forms. Still, there definitely is room for additional volume conditions, as long as they don’t contradict the original ones.

The prevailing trend prior to the ascending triangle chart pattern can provide a clue about the triangle breakout direction. For high probability setups we encourage you to only trade this in the direction of the prevailing trend. If you have the right system and strategy to make it work and you are disciplined enough to follow the rules. A great trading tool for identifying breakouts is a volume indicator. Real breakouts usually occur during high trading volumes and high volatility. The fake breakouts come up during low volumes and they look more like a range rather than a breakout.

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At this point, the buyers of the issue outpace the sellers, and the stock’s price begins to rise. The supply line is the top line of the triangle and represents the overbought side of the market when investors are going out taking profits with them. The Breakout of the chart pattern will decide either this pattern will act as https://g-markets.net/ a continuation chart pattern or reversal chart pattern because of symmetrical price behavior. It works in all timeframes but we will recommend you to trade any timeframe above 15M. Because below 15-minute timeframe, it will become difficult to identify false breakouts due to the high frequency of trading in lower timeframes.

In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows. For example, three touches how to trade symmetrical triangle of the support line and two for the resistance line. Get $25,000 of virtual funds and prove your skills in real market conditions.

quiz: Understanding multiple time frames analysis

Harness past market data to forecast price direction and anticipate market moves. Based on the development of this reversal pattern, we close the other 50% of the trade. The more you move the stop to the left, the bigger the distance is between the stop and the entry price.

• Market makers are deciding the future direction of price either bullish or Bearish.
• In this case, the price ended up breaking above the top of the triangle pattern.
• Generally, we draw the triangle pattern to highlight these ranging areas.Also read about Trader’s Tech and Installing MT4 EAs with Indicators.
• A breakdown from the lower trend line indicates the beginning of a new bearish trend.

When this happens, traders look for the price level at which both trend lines intersect, which serves as a breakout level. The symmetrical triangle is a useful pattern for traders to be aware of because it can help them anticipate breakouts and identify potential trading opportunities. The direction of the breakout can be used to help identify which way the market is likely to move. If the price breaks out above the upper trendline, then it is likely that prices will continue to move higher. Conversely, if the price breaks out below the lower trendline, then it is likely that prices will continue to move lower. The symmetrical triangle is also useful for determining potential price targets.

Descending Triangle Pattern

The reason why this pattern is so important is because it shows that the market is consolidating. This means that the buyers and sellers are essentially in a standoff, and no one is sure which way the market is going to go. A symmetrical triangle is a chart pattern that occurs in financial markets and is used by traders and investors to identify potential price movements.

This triangle could have broken either way but the break out of the apex as the two trend lines met was upwards and followed through for a trend form the break out at $69 to $75. The high of the triangle was near $70 and the low was near $67 so a target of a $3 move would have been a good goal. The following set of calculations depends on the triangle’s upper border breakout rate, which is the variable point (5). It is highly recommended to complete them as soon as a breakout occurs, so you can focus more on the calculations needed for the actual trade. Identifying a valid breakout of chart patterns is very important because market makers will try their best to capture the retail traders with simple false breakout strategies.

What is a symmetrical triangle on the daily chart?

It should be noted that a recognized trend should be in place for the triangle to be considered a continuation pattern. In the above image, you can see that an uptrend is in place, and the demand line, or lower trendline, is drawn to touch the base of the rising lows. These highs do not have to reach the same price point but should be close to each other.

The symmetrical triangle is formed by two converging trendlines connecting a series of highs and lows. The trendlines are usually drawn using a trendline tool and connect the highs and lows of the price action. The breakout of the triangle pattern decides the direction of the price trend. Each chart pattern you trade should inform you about your target for the trade. This is because chart patterns have targets, which is well-known to the more experienced traders. Have it in mind that when you trade chart patterns, your minimum target equals the size of the pattern itself.

Symmetrical Triangle Target

On the other hand, its limitation lies in the fact that you may never get the opportunity to enter a trade as the retest isn’t guaranteed to happen. The advantage of the first option is that you can’t miss out on a trade, as you are in as soon as the candle closes above/below the trend line. However, the close may occur far away from the trend line, which means that your take profit window has narrowed, while the amount of pips you are risking has increased. The wedge shape is formed by two converging trendlines, indicating a narrowing of the peaks and troughs on a chart. In contrast to ascending or descending triangle formations, the upper and lower trendlines of the symmetrical triangle pattern are both pointing towards a central point. In Technical Analysis of Stock Trends (1948), Edwards and Magee suggest that roughly 75% of symmetrical triangles are continuation patterns and the rest mark reversals.