What is the Symmetrical Triangle Chart Pattern?

A symmetrical triangle is a common **chart pattern** used in technical analysis that indicates a period of consolidation before a potential price breakout.

According to a reference from 01-Apr-2024, a symmetrical triangle, also known as a **coil**, is "*a chart pattern characterized by two converging trend lines connecting a series of sequential peaks and troughs*". These trend lines should converge with opposite slopes, forming a narrowing pattern that resembles a triangle.

## Definition and Formation

The symmetrical triangle pattern forms when the price of an asset makes lower highs and higher lows. When you connect these points with lines, you create two trend lines that converge towards each other at a roughly symmetrical angle.

*   **Upper Trend Line:** Connects a series of declining peaks (lower highs).
*   **Lower Trend Line:** Connects a series of rising troughs (higher lows).

These two lines meet at an apex, signifying decreasing volatility and indecision in the market as the trading range narrows.

## Key Characteristics

Understanding the features of a symmetrical triangle is crucial for identification:

*   **Converging Trend Lines:** The defining feature, with one line sloping down (resistance) and the other sloping up (support).
*   **Opposite Slopes:** The pattern requires these lines to have contrasting directions, unlike ascending or descending triangles.
*   **Sequential Peaks and Troughs:** The pattern is built by connecting at least two lower highs and two higher lows.
*   **Decreasing Volume:** Often, trading volume decreases as the pattern develops, reflecting market indecision. Volume typically increases significantly upon a breakout.
*   **Consolidation Pattern:** It represents a pause in the prevailing trend as buyers and sellers reach a temporary equilibrium.

## Trading Insights

While the symmetrical triangle is a **neutral pattern** in itself, meaning it doesn't inherently signal a bullish or bearish outcome, it is often interpreted as a **continuation pattern**. This suggests that the price is likely to continue in the direction of the trend that preceded the triangle's formation. However, it can also signal a **reversal**.

Traders look for a **breakout** – when the price decisively closes above the upper trend line or below the lower trend line, often accompanied by a surge in volume. The direction of the breakout indicates the potential future direction of the price.

For example:

1.  If a symmetrical triangle forms during an **uptrend**, a breakout above the upper trend line would reinforce the bullish sentiment.
2.  If it forms during a **downtrend**, a breakout below the lower trend line would strengthen the bearish outlook.
3.  A breakout in the opposite direction of the preceding trend could signal a **reversal**.

Analyzing the context of the market and other technical indicators is vital when trading breakouts from symmetrical triangles.