Symmetric Expanding Forex Pattern is an strategy use by master Forex Traders, The Symmetric Triangle is also formed as the continuation pattern during a trend. This chart pattern consists of at least two higher lows and two lower highs. Symmetrical Triangle in this chart pattern is formed when all the four points are connected and the two trend lines converge when the points are extended. The points where the two trend lines converge is called the Apex. In this Forex chart pattern, the price of any currency will bounce between the two trend lines but towards the apex and the typical breakout occurs in the direction of the previous trend.
This chart pattern is also termed as coil that appears to be wide in the beginning but narrows over time. These chart patterns mark the trend continuation very often but sometimes these also indicate important trend reversals. It doesn’t matter whether the pattern is continuation or reversal, the direction in which the price can show a major movement can only be predicted after valid breakout. To confirm the Ascending Triangle pattern, the traders and investors must look for few things as explained below.
Importance of Trend
In order to analyze a pattern as a Symmetric Triangle pattern, there should be an established trend existing. The age of the trend should at least be in months. The Symmetric Triangle should mark a consolidation period after the breakout and before continuing.
Four Points are needed
Four points are needed to form this pattern. Two points are needed to draw a trend line and two trend lines are needed to plot the Symmetrical Triangle. So a total of four points are needed to form this pattern. Other requirements to form this pattern are that upper trend line should move down and the recent high should be lower than previous one. The recent low should be higher than the previous low and the lower trend line should move upwards. In an ideal condition, six points will form this pattern in which three points should be on each side before a breakout.
Duration of the Symmetric Expanding pattern
An average Symmetric Triangle pattern may last from three weeks to three months. Three months is the typical time duration of the pattern. If the pattern lasts in less than 3 weeks then it is an invalid Symmetric Triangle pattern.
Forex Trading Volume
Volume contracts with the expanding of the Symmetric Triangle and so the Forex Trading volume in this pattern starts reducing. These are the tightening consolidation conditions before the breakout.
Time Frame for the occurrence of a Breakout
An ideal breakout is expected to occur anywhere between half to three fourth of the way of the total time span of the pattern. Time span can be sized from the apex back to the point where the lower trend lines begin. If a break occurs before the halfway then might be a premature break and if it occurs closer to the apex then it may be insignificant. A breakout is possible anytime in the way as the price moves towards the apex.
Direction of the Breakout
It is safe to determine the possible future direction of a breakout only after the break occurs otherwise predicting the direction of the breakout before a break occurs and then acting on this prediction can be dangerous.
In this pattern, two methods are known to calculate the Target Price. The first method is to measure the widest distance in this Symmetrical Triangle and should be applied to the point where the breakout occurred. In the second method, a trend line is drawn that is parallel to the trend line of the pattern sloping up or down. Extending this line will plot a potential price target.
Look at the figure below for an example of Symmetric Expanding Pattern.