Symmetrical Triangle

Symmetrical Triangle is a chart pattern, characterized by converging top and bottoms. This is created when there is indecision in the direction of the market.

Pattern Formation
These patterns occurs both in an up trend or a down trend. In a trending market, when the trend looses strength, it forms contracting swings, with lower low tops and higher high bottoms, which when joined forms converging trend lines. This indicates the directionless of the market.

It can break up or break down, giving either a long or a short trade. The target for this trade is a level equal to the height of the base of the triangle, from the break out point.

Study the chart given below.

In an uptrend if it breaks up, it becomes a continuation pattern and if it breaks down it becomes a reversal pattern.

In a down trend if it breaks down, it becomes a continuation pattern and if it breaks up it becomes a reversal pattern.

How to trade?
Since it is a neutral pattern, anticipate trades in both direction. Take trades at the break out of the trend lines, with the stop loss order placed above or below the pattern or conservatively, it can be placed above or below the the breakout bar.

Compare this with ascending triangle, descending triangle.

Variation
A small triangular consolidation in a trending market, which is smaller in size and having a few bars is called as a Pennant.

| Privacy Policy | Disclaimer |