What Is a Symmetrical Triangle Pattern?
A symmetrical triangle pattern consists of many candlesticks forming a big sideways triangle. It is a neutral candlestick pattern. Symmetrical triangle patterns form by connecting at least two to three lower highs and higher lows, which become trend lines. Those trend lines converge and form an apex point, forming trends as continuation patterns.
Also known as a coil, this pattern has at least two lower highs and higher lows. It may be found in any trend, whether bullish or bearish. The breakdown or break-out from this pattern forms a new trend.
There are two lower and two higher highs in symmetrical triangle patterns; connect these points, and the lines combine as they extend. The pattern got its name because it forms the shape of a symmetrical triangle.
A symmetrical triangle can mark a trend reversal, but it often indicates a continuation of the current trend when trading stocks. No matter the pattern, reversal, or continuation, the direction of the next major move requires a valid breakout.
There are other triangle patterns, such as ascending triangles and descending triangles. The difference that separates symmetrical triangles is that the upper and lower trend lines slope towards the center point.
Symmetrical Triangle Basics
Symmetrical triangle chart patterns mostly confirm continuation. For this to happen, an established trend should already exist; the trend should be at least a few months old. Symmetrical patterns form during a consolidation period, and then the breakout occurs. It is essential to remember that patterns can break down, rather than functioning as intended.
Two points are needed to form a trend line, and 2 points are needed to form a symmetrical triangle. Therefore, 4 points are required to make a symmetrical triangle pattern.
The second height should be lower than the first to make the upper line head down. The second low should be higher than the first, increasing the lower line. The ideal pattern would have 6 points, three on each side, before the breakout.
Symmetrical triangle patterns also make up the foundation of bull pennant and bear pennant patterns.
Drawing Symmetrical Triangle Patterns
The easiest way to draw a symmetrical triangle is by using drawing or technical analysis tools. Find at least two to three peaks and two to three valleys. By connecting these peaks and valleys, they become trend lines. These trend lines converge to make the apex point of symmetrical triangles.
As the symmetrical triangle extends, the trading range gets smaller and begins to pinch. This means volume should start to diminish. The consolidation is quiet before the storm; then the breakout occurs.
Symmetrical trading requires patience; triangles can persist for weeks or months. This makes them great patterns to look for when swing trading; evidence of this can be seen when examining lines on the daily chart. These lines are also areas to watch for possible support and resistance areas.
If you decide to trade only symmetrical triangle patterns, remember to be patient; you may need to wait a while, as setting up can take three weeks to three months.
Any pattern that resembles a triangle but lasts under three weeks is considered a pennant; these can be either bull or bear pennants.
Symmetrical Triangle Pattern Trading Strategy
- Watch for a symmetrical triangle to form by connecting 2-3 peaks and valleys.
- Connect the peaks and valleys via trend lines.
- Once the price breaks out of the apex of the triangles to the upside, take a long entry.
- Take a short entry once the price breaks out of the apex of the triangles to the downside.
- Use a candlestick close above/below the midpoint of the triangle on both sides as your stop.
Breakouts With Support and Resistance
As always, it is important to wait for confirmation of the pattern and the trade’s game plan; this pattern is no different. Confirmation of a symmetrical triangle breakout is needed for it to be considered valid.
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.
Filters can confirm the validity of the breakout, helping to reduce the chances of being caught in a fake out. Whether breaking up or getting back together, confirmation is needed.
Often, traders do not wait for confirmation due to FOMO, or the fear of missing out. This can create greed and impatience because they are driven by the desire to make money. They get caught in a bad trade, having to wait out or take a loss.
After the breakout, the triangle’s apex turns into support or resistance, depending on the direction of the breakout. The price can return to the apex point to test whether it supports or resists before continuing the breakout.
Do not attempt to catch the falling knife; to guess the direction of a breakout. At that point, it is not trade but gambling. Please wait for it to happen; look for gap-up or down patterns. They are used in conjunction with technical and fundamental analysis for confirmation. Use proper risk management techniques when trading symmetrical triangle patterns.
Symmetrical Triangle Example
This is an example of a symmetrical triangle on $GLD using TrendSpider. You’ll notice that this could also be a falling wedge pattern. Traders would enter a long position when prices break out of the apex, with a stop-loss order placed below the apex level. You could also refer to this as a large bull pennant breakout, given the significant uptrend. The large uptrend formed a flagpole.
Bearish and Bullish Examples
The above picture is a daily chart of $MSFT. Often, symmetrical triangles appear within larger patterns. This example shows a symmetrical triangle inside a large bear flag. It also looks like a bear pennant. Symmetrical triangles often form the pennant or flag areas.
Symmetrical triangles can be bullish or bearish, depending on the preceding trend. This trend was bearish, so price action continued in a bearish direction. The bearish trend occurred within a larger falling wedge pattern. So, bearish patterns can also turn into bullish breakout patterns. A rising wedge pattern formed, eventually giving way to a large bullish symmetrical triangle breakout.
Frequently Asked Questions
A symmetrical triangle pattern is a neutral pattern from the start. What makes it bullish or bearish is what happens at the apex point. If the price breaks out to the upside of the apex point, then it's bullish. If it falls to the downside, then it is a bearish pattern.
The bias of a symmetrical triangle is typically the continuation of the current trend that's in place. They can be bullish or bearish.
A symmetrical triangle is typically a continuation pattern, rather than a reversal pattern. Price action follows the current trend that's already in place.
