Symmetrical Triangle - Full ExplanationA Symmetrical Triangle is considered a bullish signal, indicating that the current uptrend may continue. It is a bullish continuation pattern. It is a volatility contraction pattern. This means volatility in the market is shrinking and a sign the market is likely to breakout, soon. A Symmetrical Triangle shows two converging trendlines, the lower one is ascending, the upper one is descending. The formation occurs because prices are reaching both lower highs and higher lows. The pattern will display minimum two highs touching the upper (descending) trendline and minimum two lows touching the lower (ascending) trendline. This pattern indicates a phase of consolidation before the prices breakout.
The symmetrical triangle pattern is different from a descending or ascending triangle pattern as both triangles’ lower and upper trend lines slope towards the center point.
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.
Formation Of Symmetrical Triangle
Below is the formation of symmetrical triangle
Identification a Symmetrical Triangle
i) The sides of the triangle slope equally (that’s why it’s symmetrical)
ii) The triangle has lower highs and higher lows – at least two of each
iii) It looks like a funnel, with the price “squeezing” from the left towards the right
iv)The bullish symmetrical triangle should be formed in an ongoing uptrend and the prices should breakout from the upper trend line.
Below is the example of the bullish symmetrical triangle formed on the 15 Min chart of NIFTY.
We can see how it is formed in an ongoing uptrend and prices breakout from the upper trend line in the direction of the prior trend.
Entry
Entry can be done after the breakout.
Sometime, when the price breaks out of the Symmetrical Triangle, it might re-test the previous market structure. So, traders can enter on the pullback also. You should also look for any reversal candlestick pattern like Hammer , Bullish Engulfing in the pullback.
pullback here is very small as it is in a small Time Frame (15 Min)
Stop Loss :-
The stop loss is placed right before the breakout point in a symmetrical triangle chart pattern. Previous low before the breakout is the stop loss.
Trailing Stop Loss :-
No one knows how high or low the market can go. And by trailing your stop loss, you allow the market to reward you as it moves in your favor. You can use the Exponential Moving Average (EMA) or Moving Average (MA) to trail your stop loss. You can use the 50 EMA to trail your stop loss. If the price closes below it, then you’ll exit the trade.
Target :-
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.
i)Take the distance between the high and the low of the Symmetrical Triangle — the widest point of the pattern.
ii)“Copy and paste it” at the breakout point
iii)Exit your trade at the price projection level
There is also a bearish symmetrical triangle which is a bearish trend continuation chart pattern. The bearish symmetrical triangle should be formed in an ongoing downtrend and the prices should breakout from the lower trend line.
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Regards
Omahto
