5# The Symmetrical Triangle Trading Forex System
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A symmetrical triangle is one of many chart formations known as
continuation patterns that represent areas of price consolidation within a trending move and that are usually resolved by a breakout in the direction of the preceding trend. Whena trader buys a breakout above the top line of a symmetrical triangle formation in an uptrend, he's "buying high" with the expectation that he will be able to "sell higher."
Symmetrical triangles are composed of a descending trendline connecting swing highs and an ascending trendline connecting swing lows (a swing high is higher than the highs to its immediate left and right; a swing low is lower than the lows to its immediate left and right). The swing highs and lows must alternate on the horizontal axis (i.e. point C cannot occur before point B, and point D cannot occur before point C). In the daily bar chart of IBM [Figure , IBM symmetrical triangle]), line A-C forms the top of the triangle (resistance), and line B-D forms the bottom of the triangle (support) we buy at one point above the resistance line (the top line) of the triangle.we set a protective stop, a breakeven stop, and a profit target.
The protective stop is placed at thetriangle's second swing low (see Figure , point D) minus 50% of the 10-bar Average True Range. The stop is raised to breakeven (our entry price) when the close is greater than or equal to the entry price plus two times the trade's initial risk. For example, if the difference between the entry price and the protective stop is $300, we'll raise the stop to the entry price after a close $600 or more above the entry price. The profit target is determined by subtracting the low at point B from the high at point A and adding that difference to the point at which prices broke above the triangle's resistance line (see Figure ).
Triangle Trading Method: Description
Long and Short Triggers
a) The trigger to buy is a breakout above a bullish symmetrical triangle's resistance line.
b) The trigger to sell is a breakout below a bearish symmetrical triangle's support line.
Long and Short Orders
a) Enter a long position on a stop order placed one point above the triangle's resistance line.
b) Enter a short position on a stop order placed one point below the triangle's support line.
Long and Short Exits
a) Exit a long position at the protective stop, the breakeven stop, or the profit target.
b) Exit a short position at the protective stop, the breakeven stop, or the profit target.
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