FOREX TRADING

Once price breaks through a trend line, how can we tell whether it’s a true or a false break? Well, we can’t tell or predict until we see it later on. But, we can analyze what price has been doing before this breakout in order to form our own opinion and bias, and either pay attention to the breakout or ignore it.

We can all of the time go back and look at waves pattern, or just, whether price was making Lower Lows (LL), Lower Highs(LH), Higher Highs (HH) etc..?

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This pattern shows two converging trendlines (support levels & resistance levels) and is (1) a bearisch formation that usually forms during a currency pair downtrend as a continuation pattern (downtrend will continue) or (2) a bullish formation that usually forms during a currency pair uptrend as a continuation pattern. (uptrend will continue)

This pattern is confirmed when the currency pair price breaks out of the symmetrical triangle formation (1) to the downside and closes below the lower support trendline in order to continue the downtrend or (2) to the upside and closes above the upper resistance trendline in order to continue the uptrend.

What does a Symmetrical Triangle Formation look like?

The symmetrical triangle is marked by two important trend lines. At its top, there is a line of resistance where traders are willing to sell the currency pair. This resistance line communicates the fact that bearish currency traders are over time willing to pay lower and lower prices for the currency pair indicating a possible break out to the downside.

At it’s bottom, the support line communicates the fact that bullish currency traders are over time willing to pay higher and higher prices for the currency pair indicating a possible break out to the upside.

How to trade this pattern?

For it’s best prediction, an established trend should exist, either a strong down or a strong uptrend. Once the currency pair breaks out the symmetrical triangle, most likely, the price will continue it’s previous trend.

Trade the breakout!

Chart example

Please note how the previous trend is an uptrend, once it breaks out the symmetrical triangle, it’s uptrend continue!