HOW TO TRADE BULLISH SYMMETRICAL TRIANGLE CHART PATTERN

How to trade bullish symmetrical triangle chart pattern
Infographic - How to trade bullish symmetrical triangle chart pattern

Entry: after breaking the triangle's upper border at point (5), either with an entry after the breakout, or after a possible retest of the upper border's breakout rate.

Take profit: identified by measuring the vertical distance between the first resistance (1) and the first support (2), that measurement is then applied from the breakout rate (5)

Stop loss: can either be the breakout rate (5), or the last touch to the triangle's lower border (4) before the breakout

BULLISH SYMMETRICAL TRIANGLE PRICE ACTION

This chart pattern starts forming with bulls already in control of the exchange rate's uptrend. Then both bears and bulls try to squeeze on each other by creating lower highs and higher lows respectively, till the bulls finally break the triangle's upper border created by the bears, and the exchange rate continues its uptrend.

Let's break down the pattern formation!

In an uptrend, price action finds the first resistance (1), which will be the highest high in the pattern.

Price action reverses direction from the first resistance (1) and goes downwards till it finds the first support (2), which will be the lowest low in the pattern.

Price action reverses direction from the first support (2) and goes upwards, till it finds the second resistance (3), which must be lower than the first resistance (1)

Price action reverses direction from the second resistance (3) and goes downwards, till it finds the second support (4), which must be higher than the first support (2)

The pattern is completed when price action reverses direction from the second support (4) and goes upwards till it breaks the triangle's upper border at point (5)

NOTES ON BULLISH SYMMETRICAL TRIANGLE

Direction

Continuation

Type

Bullish

Occurrence

High

Common term

All

Before the breakout, 4 touches to the triangle's upper and lower borders are the minimum for a valid pattern, more touches are acceptable.

Although named symmetrical, upper and lower borders don't have to be perfectly symmetrical, as long as lower highs (1-3-…) and higher lows (2-4-…) are being formed, the pattern is considered valid.

The breakout of the pattern is expected at around (half / two thirds) the triangle formation, measured from the first resistance (1) to the intersection point of upper and lower borders.

The most common direction of the pattern is a continuation, but that doesn't rule out the existence of reversal symmetrical triangles. The target measurement in that case will be applied from the lower border's breakout rate.

Volume usually decreases as the pattern is being formed, and increases when breaking or retesting the triangle's upper border breakout rate (5)

This pattern is commonly found on all time frames.

BULLISH SYMMETRICAL TRIANGLE REWARD:RISK

When using the triangle's upper border breakout rate as stop loss, R:R will depend on the (breakout rate-entry rate) distance, compared to the target measurement (1-2) distance.

When using the last touch before the breakout (4) as stop loss, the pattern's R:R improves when that touch is near the end of the triangle, as well as when the lower border's up-slope is sharper.

Always remember that both stop loss levels explained above are absolute, the actual stop loss rate for your trade setup should be a bit beyond those levels to give the trade setup some room to breathe, and of course, calculations for position size and R:R should be done with respect to those rates.

BULLISH SYMMETRICAL TRIANGLE REAL TRADE

Bullish symmetrical triangle real trading example
Forex chart - Bullish symmetrical triangle real trading example, as found on the D1 chart of EUR/CAD using XM's MT4 platform

PRE-BREAKOUT CALCULATIONS

Since a bullish symmetrical triangle chart pattern can be spotted after the reversal from point (4), you can save yourself precious time by doing the following set of calculations before the breakout, since they don't rely on the trade's entry rate.

However, unlike other patterns where the breakout rate is fixed, a bullish symmetrical triangle breakout rate is variable, depending on the time of the breakout. As a result, pre-breakout calculations are limited to pattern length and second stop loss.

  • Pattern length (point (1) rate - point (2) rate)
    • (1.37042 - 1.29490) * 10000 = 755.2 pips
  • Stop loss #2 rate (point (4) rate - 10% of pattern length)
    • 1.30629 - ((10 * 755.2 / 100) / 10000) = 1.29874

POST-BREAKOUT CALCULATIONS

The following set of calculations depends on the triangle's upper border breakout rate, which is the variable point (5). It is highly recommended to complete them as soon as a breakout occurs, so you can focus more on the calculations needed for the actual trade.

  • Take profit rate (breakout rate + pattern length)
    • 1.34142 + (755.2 / 10000) = 1.41694
  • Stop loss #1 rate (breakout rate - 20% of pattern length)
    • 1.34142 - ((20 * 755.2 / 100) / 10000) = 1.32632

TRADE SETUP

Choosing when to enter the trade after the triangle's upper border breakout is always left to your best judgement. In this trade, we chose to enter the market at the closing rate of the candle right after the candle that broke the triangle's upper border, to ensure that the breakout was real, not a fakeout. However, entering the market at the closing rate of the bullish candle that broke the triangle's upper border was a good option and would have resulted in an even better R:R for this trade.

  • Trade entry rate
    • At the closing rate of the candle right after the candle that broke the triangle's upper border at point (5): 1.34775
  • Take profit in pips (take profit rate - entry rate)
    • (1.41694 - 1.34775) * 10000 = 691.9 pips
  • Stop loss #1 in pips (entry rate - stop loss #1 rate)
    • (1.34775 - 1.32632) * 10000 = 214.3 pips
  • Stop loss #1 R:R (take profit in pips / stop loss #1 in pips)
    • 691.9 / 214.3 = 3.229
  • Stop loss #2 in pips (entry rate - stop loss #2 rate)
    • (1.34775 - 1.29874) * 10000 = 490.1 pips
  • Stop loss #2 R:R (take profit in pips / stop loss #2 in pips)
    • 691.9 / 490.1 = 1.412

Currency pair

EUR/CAD

Timeframe

D1

Breakout

30-May-2013

Platform

MT4

Broker

XM