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. Watch our video on how to identify and trade symmetrical triangle patterns.
What Is a Symmetrical Triangle Pattern & How to Identify These 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.
They form during trends as continuation patterns. Symmetrical patterns can also be known as a coil. This patterns has at least 2 lower highs and higher lows. Watch our video above to learn more about symmetrical triangles on stock charts.You can find this pattern in any trend whether bullish or bearish. The breakdown or break out from this pattern goes on to form a new trend.
The bulls and the bears are in a constant battle causing greed and fear. Beginner traders and those who have not yet mastered control over their emotions will always trade off these feelings. It’s been happening since long ago.
We get our Japanese candlesticks patterns because a rice trader realized relationship this long ago.
Basics of Symmetrical Triangle Patterns
As stated above, there are 2 lower highs and 2 higher highs in symmetrical triangle patterns. You can connect these points and the lines combine as they extend. It forms the shape of a triangle that’s symmetrical hence its name.
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 symmetrical is different from these because the upper and lower trend lines slope towards the center point (read our post on how to start investing in stocks).
Is a Symmetrical Triangle Pattern Bullish or Bearish?
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.
These patterns work best in tandem with technical indicators and other patterns. There will always be patterns within patterns. It doesn’t matter if its potstocks or large caps.
These patterns form by the grouping of candlesticks such as bullish candlesticks, bearish candlesticks, doji candlesticks and hammer candlesticks to name a few. Patterns will tell you of a reversal or continuation.
Technical indicators such as the simple moving average formula or VWAP trading strategy can confirm these moves. The MACD and RSI are helpful as well. For example, the RSI can be used to see if the stock has become overbought following a breakout.
Stocks that are overbought or oversold always move the opposite direction to correct itself. Using these tools together help to paint a clearer picture of what trade you should be making.
Trends and Points
Symmetrical triangle chart patterns mostly confirm continuation. In order for this to happen an established trend should already exist. The trend should be at least a few months old.
We get the symmetrical pattern during a consolidation period. Then the breakout happens. Just remember that patterns can break down instead of doing what they’re supposed to do.
You need 2 points to form a trend line and you need 2 points to form a symmetrical triangle. Therefore, you need 4 points 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 high 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.
We teach how to trade triangles on our live daily streams. Check out our trading service to learn more.
How Do You Draw a Symmetrical Triangle Pattern?
The easiest way to draw a symmetrical triangle is by using the drawing tools in your brokerage account. Find at least two to three peaks and two to three valleys. When connecting these peaks and valleys via your drawing tools, 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. This means volume should start to diminish. The consolidation is quiet before the storm. Then the breakout occurs.
Symmetrical trading takes patience. This triangle pattern can go for a few weeks up to many months. You’ll see evidence of this when you’re drawing your lines on the daily chart.
That’s why it’s important to see patterns within patterns. Whether you’re using penny stock trading strategies or swing trading techniques you want to be aware of all patterns.
If you decided to trade just symmetrical triangle patterns, you can be waiting awhile because it take 3 weeks to 3 months to set up. Any pattern that looks like the triangle but is under 3 weeks is a pennant.
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Breakouts With Support and Resistance
You need confirmation of a symmetrical triangle breakout for it to be considered valid. Use a price or time filter to confirm breakout validity. Does price have a 3% break? Is the price sustained for 3 days?
Those filters can confirm the validity of the breakout so you’re not caught in a fake out. Whether it’s breaking up or down you want the confirmation. So many times traders don’t wait for confirmation because they want to make money.
They get caught in a bad trade they either have to wait out or take a loss (take our free stock market courses and we’ll teach you how to read the market).
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.
It’s never smart to guess the direction of a breakout. Wait for it to happen. Look for gap up patterns or gap down patterns. Use volume as confirmation.
Confirmation for breakouts to the upside are especially important. Take our candlesticks patterns course.
How to Trade Symmetrical Triangle Patterns
- How to trade symmetrical triangle patterns:
- Watch for a symmetrical triangle to form by connecting two to three peaks and valleys (lower highs and higher lows).
- 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.
Symmetrical triangle patterns can take awhile to form. Look for the patterns that are trading inside the symmetrical triangle. That way you won’t miss out on any moves.
Confirmation of the breakout is important. Study these patterns. Practice trading them in a simulator so you’ll be prepared when you use real money in a live trading account. Take our free online trading courses.