Symmetrical Triangle: Definition, How it works, Formation

And as expected the stock did a downside breakout since the underlying trend was also bearish. Each day our team does live streaming where we focus on real-time group mentoring, coaching, and stock training. We teach day trading stocks, options or futures, as well as swing trading. Our live streams are a great way to learn in a real-world environment, without the pressure and noise of trying to do it all yourself or listening to “Talking Heads” on social media or tv.

You’ve also been presented to a couple of techniques that we have used in the past to improve on strategies, and that could work well with the symmetrical triangle pattern. In general, you should always plan your stop loss and profit target levels before you enter a trade, not to be affected by trade-related emotions as you decide your exits. 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. If the higher timeframe is in an uptrend, then chances are, the symmetrical triangle would breakout higher. Initiate a new position when the price breaks out again from the range of the Pullback in the underlying trend direction.

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This price target is typically calculated by measuring the height of the triangle and projecting this distance from the breakout point. The same strategy can be applied with traditional support and resistance levels. These are horizontal levels in the chart where the price has consolidated or pivoted away from previously. When trading a long position, we would look for an upward breakout candle of the symmetrical triangle, with the RSI reading above 50. Vice versa, a short position would entail a breakdown of the symmetrical triangle with RSI below 50. In a bearish environment, we want to only trade a bearish breakdown of the symmetrical triangle.

Trading volume is a key confirming indicator in the formation of the symmetrical triangle pattern since it reflects the strength of price movements. The symmetrical triangle pattern’s volume contracts during its formation, indicating a period of consolidation. The contraction leads to the convergence of trendlines, creating a symmetrical triangle shape. When the price breaks out of the symmetrical triangle, an expansion in trading volume is crucial in providing trend momentum. Symmetrical triangles represent a pause in the prevailing trend as bulls and bears reach an equilibrium. 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.

1. The overall market conditions heavily impact the reliability of Ethereum’s triangle.
2. The failure of the symmetrical triangle pattern results in increased market volatility and unpredictable price swings.
3. Look for a break above the upper trend line (resistance) or a break below the lower trend line (support) to help traders spot potential breakout locations.
4. Still, there definitely is room for additional volume conditions, as long as they don’t contradict the original ones.
5. Traders avoid making significant commitments until the price breaks above or below the symmetrical triangle pattern.

This is especially true if the Relative Strength Index (RSI) suggests a balance between buyers and sellers. But external market forces can disrupt this balance and influence the breakout direction. Notice that the volumes during this breakout are relatively low and stay low over the next few periods. Later on we see a bullish breakout when the trading volumes are increasing. Traders should look for confirmation with volume indicators or a retest of the trend line before considering the breakout valid.

It is a consolidation pattern that signals a potential trend reversal and is formed by two converging trendlines connecting a series of highs and lows. A Symmetrical Triangle requires at least two highs and two lows, forming converging trend lines with roughly equal slopes. The pattern often represents a pause in the prevailing trend, and the breakout direction indicates the potential future trend. It is formed during a trend and often results in the continuation of that trend after the breakout. However, it’s crucial to remember that while a symmetrical triangle is typically a continuation pattern, it can sometimes signal a trend reversal.

What exactly is a Symmetrical Triangle Pattern in Technical Analysis?

1. A pullback is when the price does a return move to the breakout price level or some extent.
2. The range is defined by the two converging trendlines, with the upper trendline connecting the highs and the lower trendline connecting the lows.
3. 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.
4. The target achieves when the price touches the Trendline drawn from the highest peak of the pattern.
5. The pattern is also confirmed when the price exits the triangle, which occurs with high trading volume.

These trend lines ought to be convergent with a slope that is about equal. 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. Yes, a symmetrical triangle pattern can fail when the price breaks out of the pattern but then reverses direction, resulting in a false breakout. In the copper chart above, a bullish symmetrical triangle pattern appears in wave (4) of the impulse pattern. The triangle led to a bullish breakout above the upper line in wave (5).

Step #2: Check to See If the Prevailing Trend Is Moving Upwards

The symmetrical triangle pattern represents a temporary pause or rest in the ongoing trend at which the how to trade symmetrical triangle price of assets is balanced, due to indecision in the market. This chart pattern starts forming with bulls already in control of the exchange rate’s uptrend. A symmetrical triangle is a chart formation where the slope of the price’s highs and the slope of the price’s lows converge together to a point where it looks like a triangle.

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Forex traders use the symmetrical triangle pattern when seeking opportunities in market consolidations, as it effectively identifies price compression. The compression indicates a buildup of market tension, suggesting that a significant price movement is imminent. The symmetrical triangle is a crucial tool for Forex traders to leverage the buildup of volatility following the consolidation phases.

These patterns frequently develop before the trend resumes its prior direction. Reversal patterns, on the other hand, suggest that the present trend is about to change. The MACD indicator tracks the relationship between two moving averages of a security’s price and is a trend-following momentum indicator. The 26-period exponential moving average (EMA) is subtracted from the 12-period EMA to generate the MACD. The MACD is then placed on top of a 9-period EMA to serve as a signal line.

This will prevent you from taking unnecessary risks, and you’ll avoid many of the false breakouts. This means that before the Symmetrical Triangle Pattern forms, we need to have a prior trend (bullish). The direction of a breakout, either above the upper trend line or below the lower trend line, tells you which side between bulls and bears has gained the upper hand. A significant increase in volume is expected during a breakout to confirm the pattern.

But when combined with the bigger picture, a symmetrical triangle can be perceived as a bull pennant or bear pennant. A pennant pattern is essentially a symmetrical triangle forming after a large, impulsive move. In this context, the symmetrical triangle is more likely to break out in the direction of the initial impulse (characterised by the flagpole). This price action leads to consecutive lower highs, and higher lows being drawn – creating the symmetrical triangle shape.

You could also call this a large bull pennant breakout since there was a large uptrend. If you decide to trade only symmetrical triangle patterns, remember to have patience; you might be waiting a while because setting up can take three weeks to 3 months. However, if a symmetrical triangle pattern forms during an uptrend and is followed by a breakout to the downside, this could signal a trend reversal. For those familiar with Elliott Wave Theory, you might be wondering how the symmetrical triangle pattern fits within this framework. In Elliott Wave Theory, a symmetrical triangle often emerges as a consolidation pattern composed of five waves labelled A-B-C-D-E.