Symmetrical Triangles

Symmetrical Triangles

Symmetric triangles are a type of graph formation where the slope of high prices and the slope of low prices converge to a point where they simulate a triangle.

[caption id="attachment_701" align="aligncenter" width="426"] Symmetrical Triangles[/caption]

What happens in this graphic pattern is that the market is making high and low peaks. This means that none of the buyers or sellers are pushing the price enough to create a true trend.

This type of activity is called consolidation.

[caption id="attachment_702" align="aligncenter" width="499"] Symmetrical Triangles[/caption]

In the chart above we can see that neither buyers nor sellers could push the price towards their address. When this happens we have high and low peaks. As these two slopes approach each other, it means that there is a sudden movement of the market. We do not know what direction it will be, but we know it will. One side of the market will yield.

How can we take advantage of this? Simple. We can place limit orders (see article Types of Orders in Forex) above the slope of the high peaks, and below the low peaks. Since we know that the price is going to break up or down, we can rise in the direction to which the market moves.

 

[caption id="attachment_703" align="aligncenter" width="500"] Symmetrical Triangles[/caption]

In this example, if we placed an order above the high peaks, we would have taken a good upward move. If an order was placed under the low peaks, it should have been canceled as quickly as the bullish break occurred.

NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.