Symmetrical Triangle
A symmetrical triangle is a chart pattern formed by two converging trendlines that connect a series of sequentially lower peaks and higher troughs. The symmetrical triangle is considered a continuation pattern, which means that it is more likely to break out in the direction of the prior trend.
Key Characteristics
In a symmetrical triangle pattern, the upper trendline connects a series of lower highs while the lower trendline connects a series of higher lows. This results in the converging trendlines forming a triangle pattern with roughly equal slopes on both sides.
Trading Implications
Traders often look for a breakout above or below the symmetrical triangle pattern as a signal of potential future price movement. A bullish breakout occurs when the price breaks above the upper trendline, indicating a potential upward trend continuation. Conversely, a bearish breakout occurs when the price breaks below the lower trendline, suggesting a potential downward trend continuation.
Traders may also look for confirmation signals, such as increased volume or a strong price move following the breakout, to validate the potential trend continuation. It is important to set stop-loss orders to manage risk in case the breakout fails and the price reverses direction.
