HOW TO TRADE SYMMETRICAL TRIANGLECHART PATTERN

in-depth tutorial

BULLISH SYMMETRICAL TRIANGLE EXPLAINED

BULLISH SYMMETRICAL TRIANGLE ILLUSTRATION

Bullish "Symmetrical Triangle" chart pattern illustration
Direction: Continuation
Type: Bullish
Occurrence: High
Common term: Medium - Long

BULLISH SYMMETRICAL TRIANGLE PRICE ACTION STRUCTURE

  • In an uptrend, price action finds first resistance 1, which will be the highest high in the pattern, where it reverses direction and goes downwards till finding first support 2, which will be the lowest low in the pattern.
  • Price action reverse direction from support 2 going upwards, till finding the second resistance 3, which must to be lower than the first resistance 1.
  • Price action reverse direction from resistance 3 going downwards, till finding the second support 4, which must to be higher than the first support 2.
  • The pattern is completed when price action reverse direction from 4 and goes upwards till it breaks the triangle's upper border at point 5.

NOTES ON BULLISH SYMMETRICAL TRIANGLE

  • Before the breakout, 4 touches to the triangle's borders are the minimum for a valid pattern, more touches are acceptable.
  • Although named symmetrical, the upper and lower borders don't have to be actually symmetrical, as long as lower highs (1 - 3 - …) and higher lows (2 - 4 - …) are being formed, the pattern is considered valid.
  • The breakout of the pattern is expected at around (half / two third) the triangle's formation, measured from first touch 1 to the intersection point of upper and lower borders.
  • The more common direction for the pattern is continuation, but that doesn't rule out the existence of reversal symmetrical triangles.
  • Volume usually decreases as the pattern is being formed, and increases when breaking or retesting the triangle's border 5.
  • This pattern is commonly found on medium and long-term time frames.

HOW TO TRADE BULLISH SYMMETRICAL TRIANGLE

  • Trade entry: after breaking the triangle's border at point 5, either with an entry after confirming the breakout, or after a -possible- retest to the breakout rate.
  • Take profit: identified by measuring the vertical distance from the first touch 1 to the second touch 2, that measurement is then applied from the breakout point 5.
  • Stop loss: can either be the breakout rate 5, or the last touch to the triangle's border 4 before the breakout.

BULLISH SYMMETRICAL TRIANGLE REWARD:RISK

  • When using the last touch before the breakout as stop loss, the pattern's R:R improves when that touch is near the end of the triangle.
  • When using the breakout rate as stop loss, R:R will depend on the (entry rate - break rate) distance, compared to the target measurement (1 - 2).
  • Always remember that both stop loss levels explained above are absolute, the actual stop loss rate for your trade setup should be a bit beyond those levels to give the trade setup some room to breathe, and of-course calculations for position size and R:R should be done with respect to those rates.

BULLISH SYMMETRICAL TRIANGLE REAL EXAMPLE

Real example for a bullish "Symmetrical Triangle" chart pattern, using the daily chart of EUR/CAD on XM's MT4 platform
Currency pair: EUR/CAD
Timeframe: D1
Breakout: 30-May-2013
Platform: MT4
Broker: XM

BULLISH SYMMETRICAL TRIANGLE FOREX TRADE SETUP

  • Trade entry: at the closing rate of the candle after breaking the upper border at point 5
  • Take profit: 695.7 pips - usual measurement applied from point 5
  • Stop loss 1: 218.8 pips (R:R 3.180) - set at 21% of target measurement, beyond absolute SL1
  • Stop loss 2: 463.1 pips (R:R 1.502) - set at 7% of target measurement, beyond absolute SL2

NOTES ON THIS TRADE SETUP

  • Price action retested the breakout rate.

BEARISH SYMMETRICAL TRIANGLE EXPLAINED

BEARISH SYMMETRICAL TRIANGLE ILLUSTRATION

Bearish "Symmetrical Triangle" chart pattern illustration
Direction: Continuation
Type: Bearish
Occurrence: High
Common term: Medium - Long

BEARISH SYMMETRICAL TRIANGLE PRICE ACTION STRUCTURE

  • In a downtrend, price action finds first resistance 1, which will be the lowest low in the pattern, where it reverses direction and goes upwards till finding first support 2, which will be the highest high in the pattern.
  • Price action reverse direction from support 2 going downwards, till finding the second resistance 3, which must to be higher than the first resistance 1.
  • Price action reverse direction from resistance 3 going upwards, till finding the second support 4, which must to be lower than the first support 2.
  • The pattern is completed when price action reverse direction from 4 and goes downwards till it breaks the triangle's lower border at point 5.

BEARISH SYMMETRICAL TRIANGLE REAL EXAMPLE

Real example for a bearish "Symmetrical Triangle" chart pattern, using the H4 chart of XAU/USD(GOLD) on Oanda's MT4 platform
Currency pair: XAU/USD (GOLD)
Timeframe: H4
Breakout: 03-Oct-2016
Platform: MT4
Broker: Oanda

BEARISH SYMMETRICAL TRIANGLE FOREX TRADE SETUP

  • Trade entry: at the closing rate of the candle after breaking the lower border at point 5
  • Take profit: 482.0 pips - usual measurement applied from point 5
  • Stop loss 1: 137.3 pips (R:R 3.511) - set at 21% of target measurement, beyond absolute SL1
  • Stop loss 2: 391.2 pips (R:R 1.232) - set at 7% of target measurement, beyond absolute SL2

NOTES ON THIS TRADE SETUP

  • In Oanda's MT4 platform, the pip for XAU/USD is the first decimal point, and the fractional pip is the second decimal point, thus we truncated all calculated rates to the second decimal point to discard the third decimal.