The Picture of Hesitation: Symmetrical Triangles
A Symmetrical Triangle consists of converging highs and lows. It represents a "doubtful" market where buyers and sellers are matched. Volume usually shrinks as the pattern develops. Breakouts can go either way; about 3/4 are consolidation patterns, and 1/4 are reversals.
Clear Intent: Right-Angled Triangles
Trading Strategy
For symmetrical triangles, wait for a confirmed breakout. For right-angled triangles, early positioning is possible. The most valid breakouts usually occur between 1/2 and 3/4 of the triangle's length.
Further Reading
- Head and Shoulders Patterns (Technical Analysis)
- Consolidation, Flags and Gaps (Technical Analysis)
- Trendlines and Channels (Technical Analysis)
- Entry Points and Review Techniques (Technical Analysis)
FAQ
Q: Can the breakout direction of a triangle pattern be predicted?
A: Symmetrical triangle breakout direction is harder to predict — about 3/4 of the time it continues the prior trend. Right-angled triangles have clearer directional bias: ascending triangles tend to break upward, descending triangles tend to break downward. However, no pattern is 100% certain; you must wait for the actual breakout to confirm.
Q: What does volume behavior within a triangle pattern indicate?
A: As a triangle pattern develops, volume typically contracts gradually, reflecting market indecision. When price breaks out of the triangle boundary, volume should expand noticeably, especially for upward breakouts. If volume is insufficient at the breakout, the reliability of the signal is questionable.
Q: Is the signal still reliable if price breaks out near the triangle's apex?
A: Generally, breakouts that occur between 1/2 and 3/4 of the triangle's length are most effective. If price lingers until near the apex before breaking out, signal reliability decreases significantly because price has lost sufficient momentum by that point. In such cases, it is advisable to wait for stronger confirmation.
Q: How do you calculate a triangle pattern's price target?
A: The most common method is to measure the vertical height at the widest part of the triangle (the distance between the first high and low at the pattern's start), then project that same distance from the breakout point in the direction of the breakout. This gives the minimum price target.