Trading Strategy - Descending Triangles Upside Breakout
The descending triangle can be traded very successfully on the long side entering the trade as the stock breaks out to the upside. 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, Ok To Trade
Descending triangles are one of the most predictable patterns that are available to trade short, but also can perform on the upside. Just 43% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.87% in 8 days with half of the breakouts (41%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading descending triangles attractive.
Improve Your Trades
A break to the upside works better in a rising market or sector environment. By using filters that require the market and sector to be in a consolidation or an up trend you can improve the results. Because the upper line is sloping down the stock will be in a short term downtrend. Profitable entries tend to occur as a pull back in an up trend.
Descending triangles that breakout early in the pattern, produce inferior results. A breakout is better if it occurs after the pattern gets 30% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 2% when compared to the stock price.
Descending triangles with two highs at the same price or two closes at the same price should be avoided, as this usually occurs in an illiquid stock. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.
Trading Descending Triangles Can Be Profitable
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 1.45% in 10 days and is profitable on 51% of the trades. Overall this makes descending triangles 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, Ok To Trade
Descending triangles are one of the most predictable patterns that are available to trade short, but also can perform on the upside. Just 43% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.87% in 8 days with half of the breakouts (41%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading descending triangles attractive.
Improve Your Trades
A break to the upside works better in a rising market or sector environment. By using filters that require the market and sector to be in a consolidation or an up trend you can improve the results. Because the upper line is sloping down the stock will be in a short term downtrend. Profitable entries tend to occur as a pull back in an up trend.
Descending triangles that breakout early in the pattern, produce inferior results. A breakout is better if it occurs after the pattern gets 30% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 2% when compared to the stock price.
Descending triangles with two highs at the same price or two closes at the same price should be avoided, as this usually occurs in an illiquid stock. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.
Trading Descending Triangles Can Be Profitable
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 1.45% in 10 days and is profitable on 51% of the trades. Overall this makes descending triangles 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 traderand created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 4:49 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home