triangles

[Trevor Neal]

What is the symmetrical triangle and how can I make profits by trading it?

[Filipe Fittipaldi]

Hello Trevor, thank you for asking the question.

The symmetrical triangle is a chart pattern that forms usually as a part of a continuation pattern. The triangle consists of at least two lower highs and higher lows. Once they’re connected, the lines meet, forming a symmetrical triangle. The triangle also resembles a shrinking wedge that’s wide when the pattern forms and narrows over time. 

The symmetrical triangle is often a part of a continuation pattern, it can also indicate significant trend reversals in some instances. Still, the direction of the next important move can be identified only after a proper breakout. 

Triangle patterns serve as an efficient technical measure for trading the breakout which can be employed in other variations too. 

The chart below is an example of a symmetrical triangle. When conducting technical analysis, traders can measure the distance between the upper and lower trendline and use it to estimate the proper target once the price has broken out of the pattern. 

You should know that there are very few instances when you can spot a perfect symmetrical triangle so don’t rush into voiding imperfect patterns. Another thing to keep in mind is that analyzing triangle patterns is more about understanding the behaviour of the market through price action rather than trying to find a perfect triangle. 

Other types of triangle patterns are ascending and descending triangles. The main difference between the symmetrical triangle and the latter two is in symmetrical triangles, upper and lower trendlines are inclining towards a focal point in the centre. In ascending triangles, the horizontal upper trendline serves as an indicator for a potential higher breakout and in a descending triangle pattern, the lower trendline can signify a potential lower breakdown. 
 

Edited June 30, 2020 by Filipe Fittipaldi

[Criss Edward]

Hi Trevor, thanks for asking. 

A symmetrical triangle is a very popular chart pattern. It is considered to be a consolidation chart formation that takes place when the price action trades sideways, without a clear bias to the upside or downside. Therefore, the symmetrical triangle is considered to be a neutral pattern as it trades sideways.  

It consists of two two trend lines that are converging until the intersection point. The consolidation of the price action usually results in strong breakouts that are backed by a strong volume. 

As any chart pattern, the symmetrical triangle is conveying a message from the market of the indecision among the sellers and buyers about the future direction of the trend direction. Still, the market may seem more inclined to move in the direction of the existing trend. In cases when, for instance, the symmetrical triangle stems from a downtrend and the price breaks lower from the triangle, it is seen as a continuation pattern as it helped the existing trend to extend.

It is important to note that the symmetrical chart pattern is only in the “draft” version until the breakout occurs and activates it. 

 

[Rishabh Tyagi]

I think the above answers have explained it all very well. 

I would like to add the traders action behind the pattern. A symmetrical triangle is believed to form when sellers and buyers are having a tough fight, and no one can win which gives it a symmetric triangle formation. A breakout is seen as the indication of who won out of sellers and buyers. 

If you wish to learn more, you can check this short Guide on trading Triangles, by Nigel; 

https://www.asktraders.com/learn-to-trade/technical-analysis/triangle-patterns/