To measure the scale of a symmetrical triangle, you would like to first extend the shorter side to match the length of the opposite side. The scale of the third side of the triangle (which is missing) is the scale of the movement in price you should go after. The forces of supply and demand at that moment are typically considered almost equal. The image below shows the placement of both the stop loss and profit target. A gap is when the market makes a move during the night or in between sessions and opens lower or higher than the previous close. Typically, gaps are more common in highly volatile markets, and may give us an indication about the prevailing market sentiment.
The key to identifying a symmetrical triangle is to look for two trendlines that are converging towards each other. These trendlines will form the sides of the triangle, and the point where they converge is called the apex. The symmetrical triangle is considered a continuation pattern because it usually forms during a period of consolidation, when the market is “chopping” around within a defined range. 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.
Descending Triangle Pattern
For this reason, you should focus on the message that the market is sending, rather than identifying the perfectly symmetrical triangle. A symmetrical triangle is a chart pattern that is created when the price action of a security forms two converging trendlines. These trendlines are created by connecting a series of lower highs and higher lows, and they typically converge at a point known as the apex.
You could also think of it as a contracting wedge, wide at the beginning and narrowing over time. The perhaps most common method used to combat false breakouts is adding some distance to the breakout level you’re watching. That way you allow the market some room for the random price fluctuations that often trigger breakout systems to go long or short, and could avoid a lot of losing trades. 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.
Symmetrical triangles are also similar to pennants and flags in some ways, but pennants have upward sloping trendlines rather than converging trendlines. 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 pattern is different from a descending or ascending triangle pattern as both triangles’ lower and upper trend lines slope towards the centre point.
Trading with Symmetrical Triangle Chart Pattern
The ascending triangle is a bullish pattern that forecasts only a price rise. The descending triangle is a bearish setup that signals only a price fall. Once we have identified how to trade symmetrical triangle the symmetrical triangle pattern on a chart, we are waiting for a breakout/down to occur. Similar to other breakouts/downs, there are two options to enter a trade.
- You will benefit greatly by waiting for the breakout candle to close above the pattern.
- If you’re looking to trade a symmetrical triangle pattern, there are a few things you need to know.
- In the image below you see how we added some distance to the breakout level, and how the market did move above the first breakout level, but not the second.
The following set of calculations depends on the triangle’s lower border breakout rate, which is the variable point (5). This means that before the symmetrical triangle pattern forms we need to have a prior trend (bullish). In fact this strategy was one of the most important factors in getting some of the traders on our team to the level of success that they are at now.
Step 2: Spotting the breakout
The target measurement in that case will be applied from the lower border’s breakout rate. Also known as a coil, the symmetrical triangle pattern forms as a continuation classical chart pattern when there is a trend. The pattern is made up of at least two lower highs and two higher lows. As the points connect, the lines come together as they are extended and the symmetrical triangle takes shape.
- As the two lines get closer and closer together, it’s evident that something will have to give.
- It’s important to note that the perfectly symmetrical triangle is extremely difficult to find.
- Traders can use the height of the triangle, measured from the highest point to the lowest point, to estimate the potential price move after the break of the trendline.
- When these points are connected, the lines converge as they are extended and the symmetrical triangle takes shape.
- Traders and investors should always use additional technical analysis and market knowledge to confirm the validity of the pattern and make informed trading decisions.
Choosing when to enter the trade after the triangle’s lower border breakout is always left to your best judgement. This chart pattern is not mostly to do trading because it offers a very low risk-reward ratio. But it is used with the confluence of any other chart pattern to increase the risk-reward ratio. Use it for identification of market direction like market makers do. The ascending triangle chart pattern employs multiple entry techniques.
How Some Traders Trade Symmetrical Triangles
Another thing you could do is to sum all negative and positive gaps of the last 10 bars or so, and divide the sum of positive gaps by the sum of negative gaps to get a ratio. If the ratio is higher than 1, it would suggest that the market is bullish, while a value below 1 would suggest that it’s bearish. The trading and investing signals are provided for education purposes and if you use them with real money, you do so at your own risk. In this case, we would place entry orders above the upper line (the lower highs) and below the support line.
In the following lessons, we will then introduce you to ascending and descending triangles. After the upside breakout, it proceeded to surge higher, by around the same vertical distance as the height of the triangle. In this case, we would set an entry order above the resistance line and below the slope of the higher lows. After identifying the right breakout, you then need to define the target and risk of the trade. If the higher timeframe is in a downtrend, then it will likely breakdown lower. If the price breaks the highs, set your stop loss 1 ATR below the swing low.
The market breaks up above the triangle, turns down shortly thereafter, and then bounces up again. Another trader’s method is to place the stop-loss order just under the upper trendline in a buy trade and above the lower one in a downtrend. As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!). Notice that the volumes during this breakout are relatively low and stay low over the next few periods.
This is when the price finally breaks out of the triangle and heads in one direction or the other. If you can identify a breakout, then you can often make some profitable trades. The pattern is considered complete when the price action breaks through one of the trendlines, signaling a potential trend reversal. As the price action moves within the narrowing range, it creates a series of higher lows and lower highs, forming a symmetrical triangle pattern. 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. However, unlike other patterns where the breakout rate is fixed, a bullish symmetrical triangle breakout rate is variable, depending on the time of the breakout.
First, it’s important to identify the trend leading up to the formation of the pattern. And third, you need to have a plan for managing your trade once the breakout occurs. In this article, we’ll take a closer look at each of these three factors and show you how to trade a symmetrical triangle pattern. The symmetrical triangle forms when the price action of a security moves within a narrow range. The range is defined by the two converging trendlines, with the upper trendline connecting the highs and the lower trendline connecting the lows.
Therefore, many traders modify them to suit their trading approaches. You can use the TickTrader platform to develop your own rules for triangle trading. A symmetrical triangle occurs when the price is making lower highs and higher lows. https://g-markets.net/ However, I have added an extension of the upper level – the red line on the chart. This way, we can measure the third side of the symmetrical triangle. Have a look at the arrow on the green area between the two sides of the triangle.
If a price reversal isn’t confirmed, there is a lower chance of a fakeout. The consolidation phase is marked by multiple tagging of the two trend lines on both sides, as the buyers and sellers attempt to break the triangle. Finally, the sellers are able to push the price action below the triangle as two converging lines almost touched. In this example, the symmetrical triangle acts like a continuation pattern that simply helps to extend the downtrend further lower. In the EUR/GBP 30-minute chart above, we can see the price consolidation phase following a bullish movement. The price action trades sideways with lower highs and higher lows and eventually, the two converging trend lines meet.
The reason for this is that real breakouts usually happen during high trading volumes and high volatility. The fake breakouts appear during low volumes and they look more like a range rather than a breakout. Since the levels of any triangle are inclined, a ranging move sometimes brings the price outside the frames of triangles. Let me show you how to spot real symmetrical triangle breakouts with the help of the volume indicator. To help you understand 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.