Symmetrical Triangle Pattern: What is it & How to Use it for Trading

The descending triangle chart pattern is a bearish triangle chart pattern that forms through a series of lower highs against a flat support level. View it as the inverted triangle chart pattern version of the ascending triangle. 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.

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  2. In this example, the symmetrical triangle acts like a continuation pattern that simply helps to extend the downtrend further lower.
  3. Even so, we should not anticipate the direction of the breakout, but rather wait for it to happen.
  4. A symmetrical triangle pattern is a technical analysis tool characterized by converging trend lines, signaling a potential price breakout after a period of consolidation.
  5. Spencer is an avid globetrotter who achieved financial freedom in his 20s, while trading & teaching across 70+ countries.

Secondly, you can opt to wait for the price action to break the triangle and then return to retest the broken trend line. This option gives you a better entry as you can use the opportunity to enter the trade exactly at the retest. On the other hand, its limitation lies in the fact that you may never get the opportunity to enter a trade as the retest isn’t guaranteed to happen. The advantage of the first option is that you can’t miss out on a trade, as you are in as soon as the candle closes above/below the trend line. However, the close may occur far away from the trend line, which means that your take profit window has narrowed, while the amount of pips you are risking has increased. The symmetrical triangle is a consolidation chart pattern that occurs when the price action trades sideways.

How to Spot the Symmetrical Triangle Chart Pattern

The supply line is the top line of the triangle and represents the overbought side of the market when investors are going out taking profits with them. There are three primary types of triangles that tend to form in price charts – ascending descending and symmetrical. If you look at stock charts long enough, you’ll notice triangle patterns popping up frequently. helps traders of all levels learn how to trade the financial markets. In this case, a trader will enter a selling position when the price breaks the breakout level (in the chart, confirmed with the 61.8% level). Adding Fibonacci levels to the chart helps us confirm the breakout and find the correct levels for stop-loss and take-profit orders.

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Like many other chart patterns, to effectively trade the symmetrical triangle pattern you’ll have to find the breakout level. Since the symmetrical triangle is a continuation chart pattern, you’ll be looking to enter a position in the direction of the previous trend. A symmetrical triangle is more like a coiled spring, with converging trend lines forming a triangular shape. On the other hand, a pennant is akin to a flag fluttering in the wind, with a small rectangular shape following a sharp price movement. Experts tend to look for a one-day closing price above the trendline in a bullish pattern and below the trendline in a bearish chart pattern.

Trading a Symmetrical Triangle Pattern?

Traders use triangles to highlight when the narrowing of a stock or security’s trading range after a downtrend or uptrend occurs. Triangle patterns are aptly named because the upper and lower trendlines ultimately meet at the apex on the right side, forming a corner. These patterns are formed once the trading range of a stock or another security becomes narrow. In Technical Analysis of Stock Trends (1948), 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. Even so, we should not anticipate the direction of the breakout, but rather wait for it to happen.

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This ultimately leads to wider swings (higher highs and lower lows) and increased volatility, making it harder to predict when a breakout will happen. Also, since it neither exhibits higher highs and higher lows (uptrend) nor lower highs and lower lows (downtrend), this makes it hard to pinpoint the current trend. Once you spot the triangle pattern, wait for the breakout to occur, which could happen in either direction.

However, the pennant includes a flagpole at the beginning of the pattern, which is not present in the formation of the symmetrical triangle. The flagpole is a very important characteristic of the pennant and is created when price suddenly spikes or dives dramatically in the direction of the current trend, forming an almost vertical line. This sharp move is accompanied by heavy volume and marks the beginning of an aggressive move within the current trend.

What is an Expanding Triangle?

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. A breakout is eventually forced one way or the other as price nears the apex.

It’s considered to be a neutral pattern, as two trend lines are converging until the intersection point. 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. Moreover, we will be sharing a basic symmetrical triangle pattern trading strategy. The symmetrical triangle is a technical analysis chart pattern that represents price consolidation and signals the continuation of the previous trend.

It has been prepared without taking your objectives, financial situation and needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability with regard to the accuracy and completeness of the content in this publication. A symmetrical triangle can be either bullish or bearish, depending on the direction of the breakout. Do not attempt to catch the falling knife; to guess the direction of a breakout.

Expanding Triangle Trading Strategy #2

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The Symmetrical triangle works best with other chart pattern analysis. 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 Chart Pattern indicates an ongoing period of price consolidation bearish symmetrical triangle pattern before the prices break. That could come from either a deterioration in broader risk sentiment or renewed enthusiasm if crypto markets can build on recent stabilization efforts. XRP has been confined to the triangle structure since its surge to 2023 highs of $0.95 this past July.

People come here to learn, hang out, practice, trade stocks, and more. Our trade rooms are a great place to get live group mentoring and training. Use a price or time filter to confirm breakout validity, such as setting a filter for stocks with a 3% or greater price break and a sustained price for three days. Although named symmetrical, upper and lower borders don’t have to be perfectly symmetrical, as long as higher lows (1-3-…) and lower highs (2-4-…) are being formed, the pattern is considered valid. In a downtrend, price action finds the first resistance (1), which will be the lowest low in the pattern. Set initial stop loss orders just outside the opposite side of the triangle.

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