Symmetrical Triangle Pattern: The Complete Guide
We recommend that you have a look at backtesting, which lets you simulate the performance of various rules on historical data, in order to find out what has worked best. The Symmetrical Trading PDF guide is an invaluable tool for both novice and seasoned traders. You can easily capitalize on this simple trading pattern by following our step-by-step guide presented throughout this article. Now, we need to define our entry technique, which brings us to the third step of this strategy. Results may vary based on your timeframe and Bollinger Band settings, as each asset behaves differently with these parameters. Therefore, it’s recommended to backtest this strategy and customise your band settings for each asset.
The consolidation strategy is used when the price consolidates within the trendlines and no clear breakout or reversal occurs. Symmetrical triangles can serve as continuation patterns for both bullish and bearish trends. Never forget that confirmation is essential; a pattern can only be considered confirmed when the support or resistance level has been broken and tested. Traders when using symmetrical triangles patterns, look for a high volume movement in a share price so the breakout is confirmed. A horizontal upper trendline is formed in ascending triangles that predict a higher breakout. With a descending triangle, a horizontal lower trendline is formed that predicts a lower breakout.
Symmetrical Triangle chart patterns occur when a currency pair’s price gets consolidated in a way that generates two converging lines that both have equal or similar slopes. In other words, it represents a period of consolidation right before the currency pair price is forced to breakdown or breakout. Finally, while the symmetrical triangle does not indicate the direction of the breakout, it reflects a period of equilibrium between supply and demand. Traders and analysts often interpret the direction of the breakout as the direction in which the market sentiment has shifted. Identifying a symmetrical triangle requires patience and practice since the pattern develops over time.
Ignoring broader market context
- Even though these methods of deciding where to place to stop loss may be popular, do remember that they might not work everywhere.
- 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.
- The descending triangle forms in downtrends where selling pressure builds up, making the breakout predictable.
- The triangle consists of two sloping trendlines – the upper line connects at least two lower highs, while the lower line goes through at least two higher lows.
- Finally, while the symmetrical triangle does not indicate the direction of the breakout, it reflects a period of equilibrium between supply and demand.
The disadvantages of the triangle chart pattern are the how to trade symmetrical triangle risk of false breakouts and the need for confirmation, which results in missed trade opportunities. The triangle pattern has three types, the ascending, descending, and symmetrical triangle patterns. Ascending triangles signal bullish trends and are traded by buying on a breakout above resistance.
What are the key factors to consider before trading a symmetrical triangle pattern?
However, once the price breaks out decisively from the triangle, it often signals the start of a new trend or continuation of the prior trend. The direction of the breakout, whether above the upper trend line or below the lower trend line, tells you which side has gained the upper hand. Traders and analysts monitor symmetrical triangles for potential trades, guided by breakout direction and trade volume. Technical analysis using this chart pattern should confirm its validity with additional indicators. It’s a neutral chart pattern that signals market consolidation, where buyers and sellers are in balance. The direction only becomes apparent once price breaks out of the triangle.
As today’s GBP/USD chart shows, the pound sterling fell by nearly 1% against the US dollar in just one hour, forming an exceptionally long bearish candle. This article represents the opinion of the Companies operating under the FXOpen brand only. Another trader’s method is to place the stop-loss order just under the lower trendline in a buy trade and above the upper one in a sell trade. A step by step guide to help beginner and profitable traders have a full overview of all the important skills (and what to learn next 😉) to reach profitable trading ASAP. Professional traders always prepare for both success and failure scenarios, adjusting position sizing accordingly.
For a deeper understanding, explore these sections on the altFINS platform to refine your trading strategy with symmetrical triangle patterns. As per the forecast regarding the prices of natural gas, it drops to low levels for five days and is ready to test the support trend line. It has formed a symmetrical triangle over some time and is now testing the lower trend of the triangle.
- Traders and analysts monitor symmetrical triangles for potential trades, guided by breakout direction and trade volume.
- If you are thinking the market is likely to break out upward, initiate a long position when the price will touch the lower trendline (upward slanted) for the third time.
- Once the triangle has been identified, traders will watch for a breakout to occur.
- An increase in volume as the price approaches the triangle pattern’s apex generally indicates a credible breakout.
Triangle patterns can offer profitable trading opportunities when used correctly. Whether trading a Symmetrical Triangle, Ascending Triangle, or Descending Triangle, the general approach is to wait for a breakout and then enter a trade in the direction of the breakout. Triangle patterns can provide great trading opportunities but require know-how to trade them properly which is why I decided to share some advanced trading tricks to gain an edge with triangles. So while wedges are often considered a variety of triangles, their shorter duration and consistent sloping trend lines set them apart. Set initial stop loss orders just outside the opposite side of the triangle.
The triangle pattern allows traders to use its height to set target prices after a breakout. Traders estimate potential price targets by measuring the vertical distance from the highest to the lowest point of the triangle and projecting this distance from the breakout point. The stop-loss for the symmetrical triangle pattern is often put right below the breakout point. For example, if the security breaks out from $12 with high trading volume, traders will frequently place a stop-loss just below $12. A symmetrical triangle pattern is a chart pattern that is created when the price of a security converges towards an apex, forming two sides of a triangle.
Target a Move Equal to the Triangle’s Width
The size of the third side of the triangle (which is missing) is the size of the price move you should pursue. If you are getting confused, the image below will help you understand the size of the symmetrical triangle chart pattern. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.