Symmetrical Triangle Breakout

  • 6 Dec 2016
  • By Trading Central
  • Topics: FX

Symmetrical Triangles can be characterized as areas of indecision. Typically, the forces of supply and demand at that moment are Considered nearly equal. Each new lower top and higher bottom becomes more shallow than the last, taking on the shape of a sideways triangle. Eventually, this indecision is resolved and prices usually breakout of this formation to the upside or downside (often on heavy volume). In our example below, we demonstrate a long symmetrical triangle breakout strategy.

ADAPTED OPTION STRATEGY: BULL PUT SPREAD

As the upside potential is limited by the 99.27 target (recent high) a Bull Call spread allows you to lower the cost of the strategy (in comparison to a straight long call) by selling a call out of the money. As a result, the strategy consists of the simultaneous purchase of a call with a Strike at 98.90 and selling a call with a Strike at 99.25

BULL PUT SPREAD: Leg 1  
Trading Symbol GE U6
Option Type CALL
Option Strategy Buy
Strike 98.9
Expiration SEPT 2016
BULL PUT SPREAD: Leg 2  
Trading Symbol GE U6
Option Type CALL
Option Strategy Sell
Strike 99.25
Expiration SEPT 2016
ADAPTIVE FUTURES STRATEGY  
Trading Symbol GE U6
Strategy LONG
Entry Point 98.925
Target 99.27
Stop Loss 98.78
Contract Expiry SEPT 2016

POTENTIAL GAIN PER CONTRACT

A target of 99.27 for the Short Call is calculated by anticipating a re-test of the most recent high. You can also anticipate a measured move from the patterns low to the patterns high.

SYMMETRICAL TRIANGLE BREAKOUT: GE U6 JUNE 23RD

ACTUAL OUTCOME

POTENTIAL DOWNSIDE PER CONTRACT

Once the position is open, if prices fall below 98.78 the futures position should be closed as the breakout strategy failed to materialize.

Symmetrical triangle breakouts happening now.

Aud Dollar: 6A

EUR/USD: M6E


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