The symmetrical triangle can be traded on the short side entering the trade as the stock breaks out of the pattern to the downside. The pattern forms when the two boundary lines that contain the price movement converge to a point. The bottom line slopes up toward the top line which slopes down. Both lines have nearly the same slope as each other which is why the pattern is called symmetrical.
Symmetrical Triangles Can Be Profitable Short
Symmetrical triangles provide no clear breakout direction, but 45% break out to the downside making it possible to trade on the short side. Just 44% of these breakouts are profitable and on average the profit per trade is only 0.33% over a period of 9 days. The symmetrical triangle is not one of the best chart patterns when it breaks to the downside, but applying some filters can make this pattern more attractive to trade.
Improve Your Trades
Short breakouts from symmetrical triangles work better in falling markets which is clear from the historical results that were achieved. The market, sector and the stock should be in a down trend or consolidating for the best results when trading symmetrical triangles short.
A breakout from a symmetrical triangle is best if it occurs later in the pattern, but not near the start. The best trades occur when a down side break occurs after the stock bounces off the lower boundary and drops back before hitting the upper boundary.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises. One last filter that improves the results is to look for the share to close lower prior to the breakout.
Symmetrical Triangles Profitable on the Short Side as Well
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of symmetrical triangles delivers an average profit of 1.58% in 9 days and is profitable on 47% of the trades. Overall this makes symmetrical triangles attractive to trade on the short side.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 – 2008.
Jeff Cartridge is a private trader and created the website LearnCFDs.com Discover Patterns of Success
