Direction: Reversal or Continuation
What Is The Symmetrical Triangle Chart Pattern?
A Symmetrical Triangle is a neutral chart pattern, commonly found either at the bottom or top of a trend as a reversal pattern or mid-trend as a continuation pattern.
It consists of two converging trend lines – resistance and support – coming together to form a triange shape pattern.
How To Identify The Symmetrical Triangle Pattern?
Price action is confined within two converging trend lines.
Both trend lines slope toward the triangle apex at a similar angle.
Price action must touch one trend line at least three times and the other at least twice, filling out the trianglular pattern.
Volume trends downward during the pattern and a breakout occurs roughly two thirds of the way to the triangle apex.
What Is The Psychology Behind the Symmetrical Triangle Pattern?
The Symmetrical Triangle pattern is a neutral chart pattern that can provide traders with valuable insights into the market’s psychology.
It’s characterized by a converging trendline that connects a series of lower highs and higher lows.
As price approaches the apex of the triangle, it becomes increasingly difficult for buyers and sellers to establish dominance, resulting in a period of consolidation.
Eventually, the price breaks out of the triangle, signaling a potential trend reversal and the start of a new bullish or bearish trend.
The psychology behind the symmetrical triangle pattern is that there is a balance between buyers and sellers.
Both sides are competing to establish control over the price, but neither is able to achieve a decisive victory.
This creates a situation where the price is range-bound, moving back and forth between support and resistance levels.
Traders may interpret this as a sign of indecision in the market, as neither buyers nor sellers are able to gain a clear advantage.
How To Trade The Symmetrical Triangle Pattern?
To trade the symmetrical triangle pattern, traders typically wait for the price to break through either the upper or lower trendline with a strong volume surge.
The breakout should ideally occur on higher than average trading volume, as this confirms that there is significant buying or selling pressure behind the move.
Traders may enter a long or short position depending on the direction of the breakout, with a stop loss placed on the opposite side of the triangle.
The profit target can be set based on the height of the pattern, with the expectation that the price will move at least the same distance as the pattern’s height in the direction of the breakout.
Alternatively, traders may wait for a pullback to the breakout level before entering a position.
This approach can provide a better risk-to-reward ratio, as the entry price is closer to the breakout level and the stop loss can be placed tighter.
However, it may also result in missing out on some of the initial gains from the breakout. Ultimately, the best approach will depend on the trader’s risk tolerance, trading style, and market conditions.
It’s worth noting that the symmetrical triangle pattern can also result in a false breakout, where the price briefly breaks through the trendline before reversing course.
Symmetrical Triangle Performance Expectations Explained
The Symmetrical Triangle is a neutral chart pattern that can break bearish or bullish.
The most reliable patterns are produced by a breakout roughly two-thirds to the triangle’s apex.
To find potential targets, measure from the highest peak to lowest trough.
Multiply the measurement by 58% for breakouts or 36% for breakdowns.
Apply the results to the point of break down or breakout.