A symmetrical triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs. … Trend lines that are converging at unequal slopes are referred to as a rising wedge, falling wedge, ascending triangle, or descending triangle.
The symmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. When these points are connected, the lines converge as they are extended and the symmetrical triangle takes shape. You could also think of it as a contracting wedge, wide at the beginning and narrowing over time.
The Symmetrical Triangle Chart Pattern indicates an ongoing period of price consolidation before the prices breakout.
A bullish symmetrical triangle is a bullish continuation chart pattern, the movement preceding the triangle’s formation must be bullish.
On the other hand, A bearish symmetrical triangle is a bearish continuation chart pattern, the movement preceding the triangle’s formation must be bearish.
The symmetrical triangle pattern is different from a descending or ascending triangle pattern as both triangles’ lower and upper trend lines slope towards the center point.
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.
The trend lines should be equal in their convergence slope when a symmetrical triangle is formed.
Trading with Symmetrical Triangle Chart Pattern
When trading with Symmetrical Triangle Chart Pattern, there are certain rules to be kept in mind:
- The converging trend lines should be converging to make an equal slope.
- The bullish symmetrical triangle should be formed in an ongoing uptrend and the prices should breakout from the upper trend line.
- The bearish symmetrical triangle should be formed in an ongoing downtrend and the prices should breakout from the lower trend line
Stop Loss
The stop loss is placed right before the breakout point in a symmetrical triangle chart pattern.
Price Target
The price target is equal to the distance from the high and low of the earliest part of the pattern applied to the breakout price point.
The Symmetrical triangle works best with other chart pattern analysis.
Traders when using symmetrical triangles patterns, look for a high volume movement in a share price so the breakout is confirmed.
Other indicators can also help in estimating the duration of the breakout.
For example, the Relative Strength Index is used with the symmetrical triangle to estimate when the stock has become overbought after its breakout.
Key Takeaways
- The Symmetrical Triangle is a continuation chart pattern like Ascending and Descending Triangle patterns.
- The Symmetrical Triangle Pattern indicates an ongoing period of price consolidation before the prices breakout.
- The bullish symmetrical triangle pattern should be formed in an ongoing uptrend and the prices should breakout from the upper trend line.
- The bearish symmetrical triangle should be formed in an ongoing downtrend and the prices should breakout from the lower trend line
- When trading with Symmetrical Triangle Pattern, there are certain rules to be kept in mind
