A Symmetrical Triangle is a neutral chart pattern that can provide opportunities for both long and short traders depending on which side price breaks out.
A symmetrical triangle is formed when there is an area of indecision in the market where buyers try to push the price higher but are resisted by sellers.
Markets come to a standstill as price direction is called into question, usually because sellers and buyers have equal power.
The series of pumps and selloffs continues, each smaller than the last, with the triangle gradually easing upward.
When these points are connected, the lines converge as they extend, forming a symmetrical triangle.
The
chart pattern contains at least two lower highs and two higher lows.
The price range gradually narrows through a series of higher lows and lower highs, caused by increasing indecision in the market.
This pattern can form in the period before a major news release is anticipated by the market and illustrates how traders wait for information before taking the next step.
As price consolidates towards the top, tensions build and traders wait for the trend line to be broken to enter.
Eventually, areas of indecision are resolved and the formation explodes, often with an increase in volume.
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