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What is a Symmetrical Triangle?

The pattern is identified by two discrete trendlines. The first trendline connects a series of lower peaks, while the second trendline connects a series of higher troughs.

Symmetrical triangles generally form during consolidation and the volatility tends to decline as the pattern progresses.

Symmetrical triangles tend to be neutral and can signal either a bullish or a bearish situation. Therefore, a breakout from the pattern in either direction, signals a new trend.

How can we trade symmetrical triangles?
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The following example of the NZD/USD illustrates a symmetrical triangle formation on a 15-minute chart. After a rapid uptrend, the pair consolidated, unable to find a distinct trend. During the consolidating state, the pair continued to form a series of lower peaks and higher troughs. Volatility dropped off considerably, if compared to the beginning of the formation. Ultimately, the pattern ended when both of the trendlines came together.

Since bias upon the conclusion of the pattern pointed higher, we look for an opportunity to buy the pair. Given the candle following the conclusion of the trend rallied, we bought NZD/USD at 0.6240. We place our stop-loss slightly below the most recent significant low at 0.6215. The pair continued to consolidate prior to rallying approximately 80 pips. Considering this is a 15-minute chart, the profits and risks are generally smaller than if the pattern appeared on a larger timeframe.

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About Ziad Melhem

Ziad Melhem
Ziad Melhem is the Admin of Forex.com.lb with more than 10 years of experience in the local and regional "financial wheel". With vast experience in equities, capital markets, foreign exchange, derivatives, technical analysis, and financial services, he is one of the pioneers in online trading when this financial product was first introduced to Lebanon around 2000-2001. Ziad is currently the CMO of Amana Capital Group (www.amanacapital.com).

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