how to trade symmetrical triangle: What Is a Symmetrical Triangle Pattern? Definition and Trading

Since pennants have trend continuation character, the bullish pennant is likely to continue the bullish trend on the chart. When the upper side of the pennant gets broken upwards, we are likely to see an increase equal to at least the size of the pennant, and typically larger. The effectiveness of the symmetrical triangle depends on market conditions and trader skills. You can open an FXOpen account to test various strategies with the triangle pattern.

• As the space between two converging lines gets narrower, the likelihood of a strong breakout increases.
• Still, there definitely is room for additional volume conditions, as long as they don’t contradict the original ones.
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• These triangles offer little or no indication regarding the direction the stock will eventually breakout.
• 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.

Pennants are continuation patterns where a period of consolidation is followed by a breakout. The probability of a symmetrical triangle pattern breaking out from either sides of its triangle may depend on several technical factors. Conducting personal research into market sentiments and outlook may also give insight to a trader on short and long-term price directions of an asset traded in the cryptocurrency markets. Symmetrical triangles are price formations in which both support and resistance lines slant and converge on one another. The resistance line descends from the top, while the support line ascends from the bottom.

Decreasing Lines

The breakout after a pennant pattern should occur at or near the point where the trendlines converge, called the apex. 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. This means the pattern often never reaches its apex, forming a flat-topped cone rather than an actual triangle.

We could place a long trade at a price marginally above the upper trendline at the pointed end of the wedge. A symmetrical triangle pattern, also referred to as a wedge, is a consolidation phase before the asset price either breaks out to the upside or downside. Choosing when to enter the trade after the triangle’s lower border breakout is always left to your best judgement. The expanding triangle pattern, also known simply as expansionary formation, is formed during periods of very high market volatility, with many price oscillation and a not very clear trend. With each swing the pattern expands further, forming two opposite trend lines.

Converging trend lines

The symmetrical triangle is a situation on the chart where the tops of the price action are lower and the bottoms are higher. Also, the two sides of the triangle are inclined with the same angle. The primary challenge of the symmetrical triangle setup is its confusing signals. However, this is not the only aspect you should consider when entering the market. The common rule is to measure the widest part of the setup and calculate the same distance from the breakout trendline.

A descending triangle forms with an horizontal resistance and a descending trendline from the swing highsTraders can… Many experienced traders prefer to stay on the sidelines for as long as the market is ranging and until there is a high certainty that the breakout/down is imminent. We should always wait for the price to leave, and ultimately close, outside of the triangle to make sure that we are not dealing with a failed breakout. At the end of the bullish tendency the price creates another symmetrical triangle.

To help you how to trade symmetrical triangle how the symmetrical triangle pattern works, below we are going to show you the two types of symmetrical triangle patterns in combination with Fibonacci levels. We’ll also highlight where you need to enter a position and at what price level you should place a stop-loss order and a take-profit target. Two converging lines are moving to each other as the market makes the lower highs and the higher lows.

Support

This is a normal outcome when trading triangles – especially the symmetrical triangle. After all, the direction in which the triangle will break is unknown before the appearance of the triangle. For this reason, if you see the price peeking through one of the levels, this doesn’t mean that you have a breakout. In many of the cases it might be better to wait for the price to develop, before concluding that there is a breakout.

Placing an entry order above the top of the triangle and going for a target as high as the height of the formation would’ve yielded nice profits. In this case, the price ended up breaking above the top of the triangle pattern. As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!).

One Side is Steeper than the other – the potential price move is in the direction of the steeper side. If the two sides of the expanding triangle are increasing, then the pattern is likely to have bearish character. Both sides of the expanding triangle are inclined, but in opposite directions.

Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. This means that before the symmetrical triangle pattern forms we need to have a prior trend . The only real challenge with triangle patterns is identifying the real triangle pattern breakout and having enough confidence to hold the trade until the minimum target has been reached.

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A https://g-markets.net/ is eventually forced one way or the other as price nears the apex. However, a breakout too early or too late may be indicative of a weaker pattern and a less robust continuation. The price target for a breakout or breakdown from a symmetrical triangle is equal to the distance from the high and low of the earliest part of the pattern applied to the breakout price point. A trader may be able to predict angles of a symmetrical triangle where a breakout is likely to occur by applying sound knowledge of technical analysis to trading digital assets. Symmetrical triangle pattern formations can be identified by looking out for two converging lines in a roughly equal slope connecting a series of sequential price peaks and lows.

How to Trade The Symmetrical Triangle

As a result of this, it is impossible to assess the direction a symmetrical triangle will inevitably breakout. In this particular example, we see that the price action returned higher to retest the supporting trend line after the breakdown. In order to be sure that we have the opportunity to capitalize on the breakout, we decided to enter into the market once the H4 candle closed below the triangle’s supporting line . At the beginning of a triangle, the distance between two trend lines is the longest one. The consolidation of energy from both sides occurs, which allows the price action to trade sideways for a certain period of time. The purpose of this article is to look at the structure of the symmetrical triangle, what the message that the market sends through the symmetrical triangle is.

As such, many breakout traders use triangle formations for identifying breakout entry points. In Technical Analysis of Stock Trends , Edwards and Magee suggest that roughly 75% of symmetrical triangles are continuation patterns and the rest mark reversals. The reversal patterns can be especially difficult to analyze and often have false breakouts.

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These will allow the trader to avoid false signals due to bullish and bearish market traps. As the movements are many and the volatility is high, the difference between the highs and the lows is great. Because of this situation, it could be said that rather a trapezoid is formed. With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members.