From The Free Forex Encyclopedia
A Symmetrical Triangle is a method of pattern trading based on a continuation pattern. Continuation patterns also include Ascending Triangles, Descending Triangles, Wedges, Flags, Rectangles and Pennants and are essentially technical patterns that are expected to lead to the continuation of an existing trend. Continuation patterns are considered a powerful trading tool as they usually result in extremely low risk trading opportunities and spectacular returns.
A Symmetrical Triangle is most often known as a bullish continuation pattern whose technical targets are derived by adding the largest vertical height of the triangle to the ultimate breakout level, however Symmetrical Triangles can also be regarded as neutral. The Symmetrical Triangle in reverse (or downtrend) would be classed as bearish.
Generally a Symmetrical Triangle results when there is an area of indecision within the marketplace where buyers are attempting to push prices higher but are met with resistance by sellers, the market reaches a pause as the direction of prices is questioned, typically because the forces of both sellers and buyers are equal.
A series of rallies and sell-offs continues, each one smaller than the last and the triangle gradually eases upward. Eventually the area of indecision is resolved and the formation explodes, usually with an increase in volume.