The Symmetric triangle is considered a trend continuation pattern and may be formed in both uptrends and downtrends. The direction of the trend preceding the pattern’s appearance is confirmed in case of its occurrence on the chart. This pattern, as it usually is with price consolidation, represents a struggle between buyers and sellers. Though there is a firm belief that symmetrical triangles only indicate that the current trend either upwards or downwards will continue, this is not always the case.
The formation of a symmetrical triangle takes place when the upper and lower trend lines form higher lows and lower highs, and converge to form a triangle where the slopes of both trend lines are almost symmetrical. A symmetrical triangle has a line of support and a line of resistance that respectively slope upwards and downwards. It covers at least two lower highs and two higher lows and when these points are attached, the lines converge as they are extended and the symmetrical triangle takes shape. So, symmetrical triangle is a chart formation where the slope of the price's highs and the slope of the price's lows converge together to a point where it looks like a triangle. This pattern is confirmed when the currency pair price breaks out of the symmetrical triangle formation on the one hand to the downside and closes below the lower support trendline for continuing the downtrend and on the other hand to the upside and closes above the upper resistance trendline for continuing the uptrend.
The symmetrical triangle is marked by two important trend lines. At its top, there is a line of resistance where traders are willing to sell the currency pair. This resistance line communicates the fact that bearish currency traders are over time willing to pay lower and lower prices for the currency pair indicating a possible break out to the downside. At its bottom, the support line communicates the fact that bullish currency traders are over time willing to pay higher and higher prices for the currency pair indicating a possible break out to the upside. In this pattern the following two important factors are to be taken into consideration: If the triangle is formed in a downtrend and the price breaks below the support line (plus certain deviation is possible), a sell signal is received; If the triangle is formed in an uptrend and the price breaks above the resistance line (plus certain deviation is possible), a buy signal is received.
The price depending on symmetric triangle pattern formation generally falls or rises at least to its target level. It is calculated in the following way:
In case of an uptrend:
T = BL + H
In case of a downtrend:
T = BL – H
T – Target price;
BL – Breakthrough level i.e. the point where the price leaves the triangle;
H – Pattern’s height i.e. the distance between support and resistance lines at pattern’s origin.