Descending Triangles -Short Trading Strategy
The descending triangle can be traded very successfully on the short side entering the trade as the stock breaks out of the pattern to the downside. The pattern forms when the two boundary lines that contain the price movement converge to a point. The top line slopes down toward the bottom line which is horizontal.
Descending Triangles, One Of The Best
Descending triangles are one of the most predictable patterns that are available to trade short. With 57% of the patterns breaking down descending triangles can deliver good returns when they do. The average gain is 0.92% in 9 days with about half of the breakouts (45%) being profitable. These results are good but selecting the right conditions can make trading descending triangles very attractive.
Refine Your Entries
Short breakouts work better in falling markets which is clear from the results that were achieved in 2002 and 2008, so the market should be falling or consolidating. The best results are achieved trading descending triangles when the sector is falling. For some reason the trend of the sector at the start of the pattern is more important than the trend of the sector prior to the breakout.
Breakouts can occur anywhere along the length of the descending triangle pattern. Another key to picking successful short breakouts from descending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.
If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.
Descending Triangles, Profitable When the Markets Is Not
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 2.55% in 10 days and is profitable on 48% of the trades. Overall this makes descending triangles extremely attractive to trade.
Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23199
Descending Triangles, One Of The Best
Descending triangles are one of the most predictable patterns that are available to trade short. With 57% of the patterns breaking down descending triangles can deliver good returns when they do. The average gain is 0.92% in 9 days with about half of the breakouts (45%) being profitable. These results are good but selecting the right conditions can make trading descending triangles very attractive.
Refine Your Entries
Short breakouts work better in falling markets which is clear from the results that were achieved in 2002 and 2008, so the market should be falling or consolidating. The best results are achieved trading descending triangles when the sector is falling. For some reason the trend of the sector at the start of the pattern is more important than the trend of the sector prior to the breakout.
Breakouts can occur anywhere along the length of the descending triangle pattern. Another key to picking successful short breakouts from descending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.
If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.
Descending Triangles, Profitable When the Markets Is Not
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 2.55% in 10 days and is profitable on 48% of the trades. Overall this makes descending triangles extremely attractive to trade.
Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23199
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 4:16 AM
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