How to Trade Triangle Chart Patterns in Forex

Have in mind that there is a lack of volume and price movement which gives rise to a coiling pattern. As a result of this, it is impossible to assess the direction a symmetrical triangle will inevitably breakout. The following set of calculations depends on the triangle’s upper border breakout rate, which is the variable point (5).

The symmetrical triangle can be both bullish or bearish, depending on the location of the pattern. For that matter, a trader must be alert to the previous trend before the pattern is formed. In this case, a trader will enter a selling position when the price breaks the breakout level (in the chart, how to trade symmetrical triangle confirmed with the 61.8% level). In the EUR/GBP 30-min chart below, we can see how the two converging trend lines are formed following a bearish trend and eventually connect. When this happens, traders look for the price level at which both trend lines intersect, which serves as a breakout level.

This often results in a standoff between optimistic and pessimistic views. While traders might concur on the asset’s short-term value, their long-term perspectives might differ, a divergence that is reflected in the pattern’s converging lines. At the beginning of the symmetrical triangle formation sliver falls from $17.4 per ounce to $15.2 per ounce. The peaks and troughs of the triangle then begin to converge, with the next upper price point on the downward sloping line across the top of the triangle at $17.2. A triangle chart pattern involves price moving into a tighter and tighter range as time goes by and provides a visual display of a battle between bulls and bears. In general, you should always plan your stop loss and profit target levels before you enter a trade, not to be affected by trade-related emotions as you decide your exits.

Secondly, you can opt to wait for the price action to break the triangle and then return to retest the broken trend line. This option gives you a better entry as you can use the opportunity to enter the trade exactly at the retest. On the other hand, its limitation lies in the fact that you may never get the opportunity to enter a trade as the retest isn’t guaranteed to happen.

What are some key considerations for setting stop-loss and take-profit orders when trading the symmetrical triangle pattern?

Another mistake is chasing the trade when the price breaks out with a big candlestick. In such a situation, entering a trade would mess with your stop loss level. It is best to wait for the price to retest the breakout level, which happens quite a lot but not all the time. It is considered a continuation chart pattern, which means that when it forms, the price is likely to break out in the direction of the trend to continue trending in that direction. Traders may open a position as soon as the breakout candlestick closes or wait for several candles to be formed in the breakout direction. The choice depends on a trader’s experience and willingness to take risks.

• We’ll pinpoint some of the most important aspects of the pattern that you might want to focus your analysis on.
• Set your Stop loss  slightly below the lower level of the pattern for a buy trade/position or above the upper level of the pattern for a sell position.
• The perhaps most common method used to combat false breakouts is adding some distance to the breakout level you’re watching.
• As a last piece of advice before ending this article, we just once more wanted to stress the importance of always validating your strategies and setups before going live.

Finally, large triangles tend to take longer to form than small ones, so they may be more useful for long-term traders. The key to identifying a symmetrical triangle is to look for two trendlines that are converging towards each other. These trendlines will form the sides of the triangle, and the point where they converge is called the apex.

Cup and Handle Pattern: Definition & Strategy

In the case of a wedge pointing horizontally, we are looking for a breakout to either the upside or downside. However, in some cases, the support line will be too strong, and the price will bounce off of it and make a strong move up. In the chart above, you can see that the buyers are starting to gain strength because they are making higher lows. If you had placed another entry order below the slope of the higher lows, then you would cancel it as soon as the first order was hit. In this example, if we placed an entry order above the slope of the lower highs, we would’ve been taken along for a nice ride up. If this were a battle between the buyers and sellers, then this would be a draw.

A common mistake traders make is “chasing” the breakout of a Symmetrical Triangle. In the following lessons, we will then introduce you to ascending and descending triangles. The confirmation for a sell signal is the break and close of the candle below the support line as shown by a black circle. Basically, what’s happening here is that the buyers and sellers have equal strength. We introduce people to the world of trading currencies, both fiat and crypto, through our non-drowsy educational content and tools. We’re also a community of traders that support each other on our daily trading journey.

Identifying the real breakout

They are often more applicable in sectors with cyclical stocks or commodities. The effectiveness is less about the specific sector and more about the trend presence before the pattern and the overall market volatility. Just as steam builds up within the sealed pot, leading to an inevitable release, so too does market energy gather within certain chart patterns. In this scenario, the buyers lost the battle and the price proceeded to dive! You can see that the drop was approximately the same distance as the height of the triangle formation.

Symmetrical Triangle Risk Analysis (Stop Loss)

Once it’s formed, you can long the break of the highs and have your stop loss below the swing low. HowToTrade.com takes no responsibility for loss incurred as a result of the content provided inside our Trading Academy. By signing up as a member you acknowledge that we are not providing financial advice and that you are making the decision on the trades you place in the markets.

Step 2: Spotting the breakout

This triangle pattern can appear throughout any market and its popularity is notable with all types of traders who trade on any time frame. With a descending upper line, it means that the swing highs consecutively got lower. Likewise, ascending lower line means that the swing lows consecutively got higher. So, you have a symmetrically triangular structure with its base on the left and its apex on the right. For stop-loss, you’ll be looking to insert an order below the lowest price level of the previous trend.

In a USD/CAD four-hour chart lower, we see a downtrend as the sellers push the market lower. After a recent swing high, the market starts making the lower highs, while on the other side of the market we witness the higher lows. Hence, this consolidation phase within a downtrend is formed within the symmetrical triangle. Hence, we make a difference between the bullish symmetrical triangle pattern and a bearish symmetrical triangle pattern.

Technical analysis using Japanese candlesticks

Its emergence on charts signals a time for traders to heighten their focus, often indicating the onset of significant price movements. While not a definitive predictor of market direction, it offers a structured method to gauge potential outcomes. Symmetrical triangles differ from ascending triangles and descending triangles in that the upper and lower trendlines are both sloping towards a center point. Symmetrical triangles are also similar to pennants and flags in some ways, but pennants have upward sloping trendlines rather than converging trendlines. A symmetrical triangle is a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs. Trend lines that are converging at unequal slopes are referred to as a rising wedge, falling wedge, ascending triangle, or descending triangle.

From the chart of the USDJPY currency pair above, you can see that the price was trending upward before the symmetrical triangle formed, and the breakout happened in the upward direction. As the two lines get closer and closer together, it’s evident that something will have to give. Most chart patterns have specific entry and exit rules, and the symmetrical triangle is no exception.

In a downtrend, price action finds the first resistance (1), which will be the lowest low in the pattern. We research technical analysis patterns so you know exactly what works well for your favorite markets. Before the breakout, 4 touches to the triangle’s upper and lower borders are the minimum for a valid pattern, more touches are acceptable. Placing an entry order above the top of the triangle and going for a target as high as the height of the formation would’ve yielded nice profits. As you probably guessed, descending triangles are the exact opposite of ascending triangles (we knew you were smart!).