A Guide To the Symmetrical Triangle Pattern
A symmetrical triangle chart pattern is another tool used by traders as part of their technical analysis method. A forex Symmetrical triangle pattern is a trading continuation pattern that occurs while an uptrend or a downtrend is already in progress. Symmetrical Triangle patterns are formed when neither the buyers nor the sellers are able to take control of the price movement. Foreign exchange Symmetrical triangle patterns are created by the lines of a higher price values and the lines of lower price values – together they form a typical symmetrical triangle shape.
The top trend line of the Forex symmetrical triangle pattern is in essence a line of resistance – indicating a trend where traders are willing to sell. Resistance level is defined as the level at which selling is considered strong enough to hamper the price from increasing any further. This resistance line indicates points where bearish traders are becoming more and more willing to buy for less. This in turn is a strong indication of points where future downside breakout may occur.
The bottom trend line of the foreign exchange symmetrical triangle pattern is in essence a line of support – indicating bullish currency traders are becoming more willing to pay more and more for currency pair. This in turn is a strong indication to traders where points exist for future upside breakout. Support level is defined as the price level at which point the demand level is strong enough to stop the trading price from declining further. When prices reach this support level it is more likely to bounce off this level, than to break through this level.
Traders anticipate a breakout when the lines of the symmetrical triangle chart start to close the gap between them. As the gap closes, either buyer or sellers will give up on the price movement or the barrier that was formed by the triangle will be breached. This will signal a new trend in the price movement. Symmetrical triangle charts are therefore invaluable to traders as they indicate future breakout points. They aid in identifying consolidation during uptrend or downtrend and provide hints to traders to place orders.
If you are able to identify the Symmetrical triangle pattern early enough, you will be able to buy into the distinctive price movement which often follows a breakout. Even if your trading prediction is off the mark, you will still have an opportunity to cancel the first order speedily enough and make another more accurate trade.