Dear Friends, many people today are opening the doors to financial trading in search of more freedom, opportunities, and earnings. Financial trading offers people the opportunity to increase their income, diversify their asset portfolios, and move towards the future with greater confidence. Some of us are moving forward on this path to secure our futures, while others are striving to turn their dreams into reality. Financial freedom is perhaps a shared dream for many of us. By increasing our incomes, diversifying our trades, and taking steps with the right strategies, we can move one step closer to this dream. This is where chart formations, which play a critical role in technical analysis, come into play. In this article, we will take a closer look at the "Symmetrical Expanding Triangle (Symmetrical Broadening Triangle)" chart pattern. We'll explore what it is, how it forms, and step-by-step, how we can use it in financial trading.
What is the Symmetrical Expanding Triangle Pattern?
The Symmetrical Expanding Triangle, another neutral chart pattern in technical analysis, can be seen in both bullish and bearish trends.
This pattern can provide signs of either a trend reversal or continuation.
Therefore, the Symmetrical Expanding Triangle pattern presents an uncertain
outcome and the price can break out in either direction from the formation.
Because of the uncertainty in direction change, this pattern is considered a
bilateral chart pattern. This pattern usually represents a situation where the
price moves within an expanding triangle, with the movement taking the form of
an broadening shape over time. The Symmetrical Expanding Triangle pattern
manifests itself as a fluctuation between the high and low levels of price
within an expanding range. Over time, the upper and lower lines of the triangle
move apart, indicating that the pattern has a broadening structure.
 |
| The Symmetrical Expanding-Broadening Triangle Pattern |
How does the Symmetrical Expanding Triangle Pattern Form?
The Symmetrical Expanding Triangle pattern, as the name
suggests, has an expanding structure over time. An expanding structure often
indicates uncertainty and volatility in the market. The widening range of price
movement signifies the influence of both bullish and bearish trends. In the
Symmetrical Expanding Triangle pattern, the width of price fluctuation
gradually increases over the formation period. Initially, the price oscillates
within a narrower range, with fewer highs and lows. As time progresses, the
width of price fluctuation widens, leading to consecutive lower lows and higher
highs. During this process, an increasing distance emerges between the
movements of price at both the highest and lowest levels. The price fluctuation
takes on a shape that appears as if there are rising and falling straight lines
at the top and bottom parts of the Symmetrical Expanding Triangle pattern.
Ascending Upper Straight Line
The upper line represents an
ascending straight line that connects the high points where the price moves in
the Symmetrical Expanding Triangle pattern. In other words, it is created by
connecting consecutive peaks of upward movements. During the formation of the
pattern, the upper line is usually inclined upwards. This forms the upper
boundary of the triangle that defines the shape of the pattern. At the
beginning, the line may have a lower slope, but as the price continues its
upward trend over time, the line tends to tilt upwards. During this process,
the line often rises at a steeper angle to reflect the strength of the trend.
This line is also known as the resistance line within the pattern structure
because the price typically encounters resistance when approaching this line
and tends to reverse.
Descending Lower Straight Line
The lower line represents a
descending straight line that connects the low points where the price moves in
the pattern. That is, it is usually formed by connecting consecutive troughs of
downward movements. During the formation of the pattern, the lower line usually
shows an expanding tendency. This line moves away from the upper trend line
over time and defines the lower boundary of the triangle. At the beginning, the
line may have a more horizontal slope, but as the price continues its downtrend
over time, the line tends to tilt downwards. During this process, the line
often descends at a steeper angle to reflect the strength of the trend. This
line is referred to as the support line within the pattern structure because
the price usually finds support when approaching this line and tends to
initiate an upward movement.
The distance between the upper and lower lines tends to be narrower at the beginning of the pattern and widens over time. As the upper and lower lines move away from each other, the pattern structure takes on the appearance of an broadening triangle. This expansion is associated with increased variability and intensified market volatility. As the distance between these lines widens, it can provide more information about the future movements of price and the breakout points may become more pronounced.
How to Trade with the Symmetrical Expanding Triangle Pattern?
When observing the Symmetrical Expanding Triangle pattern,
an increase in market volatility is often noted. If an upward trend is present
and the price breaks out above the triangle, it indicates a continuation of the
uptrend. Conversely, if the price breaks out below the triangle, it suggests a
reversal in the uptrend. Similarly, the same principle applies within a
downtrend. If the price breaks out below the triangle in a downtrend, it
indicates a continuation of the downtrend, while breaking out above suggests a
reversal. As seen, the Symmetrical Expanding Triangle pattern is considered a
neutral chart pattern. The direction of trade orders depends on how the pattern
completes and how the price breaks the upper or lower lines.
Long Position with the Symmetrical Expanding Triangle Pattern
The Symmetrical Expanding Triangle can appear in both bullish and bearish markets, but what really matters is how the price reacts to the upper boundary of the pattern. If the price manages to break above this upper line, it often suggests a bullish reversal is underway. In other words, the breakout signals upward momentum and can be seen as a good opportunity to consider opening a buy position. It is also common to see the price break out and then pull back slightly to retest the upper line. This retest does not necessarily mean the breakout has failed. In fact, many traders watch for this exact scenario. If the price bounces back up after testing the upper boundary, it can create another chance to enter a long trade with more confidence.
Volume plays a key role as well. A breakout that happens with weak or low volume might not be reliable, since it shows that fewer traders are backing the move. On the other hand, when a breakout comes with higher trading volume, it shows stronger conviction in the market, making the signal more trustworthy. To increase the reliability of the setup, traders often look for confirmation from other technical indicators, such as moving averages or momentum oscillators. Combining these signals with the breakout gives a more solid foundation for making a trading decision.
- Long Position (Buy): It's possible to place a buy order above the upper line of the Expanding Triangle (after the confirmation candle is formed) once the price breaks above this line.
- Stop Loss: The Stop Loss order can be placed slightly below the lower line of the pattern.
- Target: The target is often determined by projecting upward the height of the formation (the distance between its widest part).
In the image below, you can see a trading example made with
the Symmetrical Expanding Triangle pattern on the 4-hour Euro/New Zealand
Dollar (EUR/NZD) currency chart. The price has risen by breaking above the
upper line of the pattern:
 |
| Symmetrical Expanding Triangle on EUR/NZD chart |
Short Position with the Symmetrical Expanding Triangle Pattern
When looking at the Symmetrical Expanding Triangle, a key bearish signal comes if the price breaks down through the lower boundary of the formation. Whether the overall market is trending up or down, this kind of breakdown is usually seen as a sign that prices might keep dropping, opening the door for a short trade. It is not unusual for the price to dip below the lower line and then climb back up to retest that same level. This kind of retest does not always invalidate the signal. In fact, many traders actually wait for it, since a fresh drop after the retest can provide a more secure entry point for a short position.
Trading volume is also an important factor to pay attention to. A breakdown on light volume might be viewed with caution, as it suggests that not many market participants are driving the move. On the other hand, when the drop is accompanied by strong volume, the signal is generally considered much more reliable. For additional confirmation, traders often turn to other technical tools, such as trading divergences or moving averages. When these indicators align with the breakdown, the confidence in the short trade setup increases, helping reduce the risk of a false move.
- Short Position (Sell): It's preferable to place a sell order slightly below the lower line of the pattern (after the confirmation candle is formed) once the price breaks below this line.
- Stop Loss: The Stop Loss order can be placed slightly above the upper line of the pattern.
- Target: The target is typically determined by projecting downward the height of the formation (the distance between its widest part).
In this example, you are viewing a trading example conducted
with the Symmetrical Expanding Triangle pattern on the 4-hour U.S. Dollar/Swiss
Franc (USD/CHF) forex chart. The price experienced a decline by breaking below
the lower line of the pattern:
 |
| Symmetrical Expanding Triangle on USD/CHF chart |
Always keep in mind: Financial trading can offer the returns you envision, but it also comes with risks. Just like any chart formation, the Symmetrical Expanding Triangle pattern can give misleading signals when used alone. Therefore, it's important to approach trading with a broad perspective and use it alongside other technical analysis tools. Additionally, establishing suitable risk management strategies before trading is a critical step. By following these steps, you can increase your chances of making profits in trading.