Symmetrical triangle patterns are a bigger overall candlestick pattern. It consists of connecting coequal 2-3 peaks and valleys on both support and resistance levels, which leads price action to an apex point. This pattern could be either bullish or bearish depending on where price action goes outside of the apex point.
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What Are Symmetrical Triangle Patterns?
A symmetrical triangle pattern consists of a bunch of candlesticks that form 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 during trends as continuation patterns.
Also known as a coil this patterns has at least two lower highs and higher lows. May be found in any trend whether bullish or bearish. The breakdown or break out from this pattern goes on to form a new trend.
There are 2 lower highs and 2 higher highs in symmetrical triangle patterns; connect these points and the lines combine as they extend. Pattern got its name due to the fact the pattern forms the shape of a triangle that is symmetrical.
A symmetrical triangle can mark a trend reversal but more often than not they mark a current trend continuation when stock trading. No matter what the pattern, reversal or continuation, the direction of the next major moves requires a valid breakout.
There are other triangle patterns such as the ascending triangle and descending triangle patterns. The difference that sets symmetrical triangles apart from the others are that the upper and lower trend lines slope towards the center point.
Trends and Points
Symmetrical triangle chart patterns mostly confirm continuation. In order for this to happen an established trend should already exist; trend should be at least a few months old. Symmetrical patterns form during a consolidation period; then the breakout happens. Important to remember; patterns can break down instead of doing what they are supposed to do.
2 points are needed to form a trend line and 2 points are needed to form a symmetrical triangle. Therefore, a total of 4 points are required to make a symmetrical triangle pattern.
The second high should be lower than the first to make the upper line head down. The second low should be higher than the first; which makes the lower line go up. The ideal pattern would have 6 points with 3 on each side before the breakout occurs.
Symmetrical triangle on $GLD
How Do You Draw Them?
The easiest way to draw a symmetrical triangle is by using the drawing/technical analysis tools.
Find at least two to three peaks and two to three valleys. By connecting these peaks and valleys via 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 takes patience; triangles can go for a few weeks up to many months. Which makes them great patterns to look for when swing trading; evidence of this when looking at lines on the daily chart. These lines are also areas to keep on watch for possible support and resistance areas.
If decide to trade only symmetrical triangle patterns remember to have patience; might be waiting awhile due to the fact it can take anywhere from 3 weeks to 3 months to set up.
Any pattern that looks like the triangle but is under 3 weeks is a pennant; these can be either bull pennants or bear pennants.
How to Trade Symmetrical Triangle Patterns
- Watch for a symmetrical triangle to form by connecting 2-3 peaks and valleys
- Connect the peaks and valleys via trend lines
- Once price breaks out of the apex of triangles to upside take long entry
- Once price breaks out of the apex of triangles to downside take short entry
- Use candlestick close above/below midway of 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 to 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 that have a 3% or greater price break; and have a sustained price for 3 days.
Filters can confirm the validity of the breakout helping reduce the chances of not getting caught in a fake out. Whether breaking up or down; confirmation is needed.
Often traders do not wait for confirmation because of FOMO; the fear of missing out. This can create greed and impatience due to the fact they just want to make money. They get caught in a bad trade having to wait out or take a loss.
After the breakout the apex of the triangle turns into support or resistance, depending on the direction of the breakout. The price can return to the apex point to test that support or resistance 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. Wait for it to happen; look for gap up patterns or gap down patterns. Used in conjunction with technical and fundamental analysis for confirmation.
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 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.
