A symmetrical triangle is made up of a series of price fluctuations - these fluctuations become lesser with each top failing to achieve the price of the earlier rally and each decline failing to reach the level of the earlier bottom.
Essentially this would mean a sideways trading range whose top can more or less be specified by a downward slanting trendline and whose bottom can be specified by an upward slanting trendline. This is known as a typical symmetrical triangle. Though there is a tendency towards symmetry it is not necessary that both the trendlines be of the same length or of the same angle.
Around four price reversals are needed to plot an authentic symmetrical triangle. Two price reversals are needed to draw the outer boundary of the triangle and two price reversals are needed to draw the lower boundary of the triangle. These reversals, whether peaks or troughs should be clear enough and should have enough space between them to construct a valid trendline.
The best breakout from a symmetrical triangle formation (this could be either on the upside or on the downside) is between half and three fourths of the horizontal distance from the base (read as the left side corner) to the apex.
Theory says any breakout beyond three fourths of the pattern could be a weak move and could fizzle out or meander aimlessly - in such a scenario it would be better to ignore such formations.
Sometimes the boundaries of a symmetrical triangle might have to be re-drawn as what initially looked like a symmetrical triangle might go on to convert into an ascending triangle. This could possibly happen when there is a low volume unsustainable breakout and one would need to reconsider the validity of the pattern and go back to the drawing board so to speak.
Two price reversals on either side are needed to plot a symmetrical triangle formation and out of these four, the first two (read as the first reversal on either side) is crucial.
The difference between the two points is measured and added to the point of breakout which becomes a minimum measuring criteria in terms of an expected price target for the pattern.
