Descending Triangles -Short Trading Strategy
Descending triangles have been very popular with traders on the short side and are not so often traded when it breaks in the upward direction. A descending triangle is defined by two lines, one on the lower boundary of the price movement which is horizontal and one on the upper side which slopes down.
Descending Triangles, Surprise On The Upside
The descending triangle does break down more than it breaks up with this occurring in 57% of the patterns. A downside breakout is profitable 45% of the time delivering an average profit of 0.92% in 9 days. A large number of downside breakouts (12.1%) return in excess of 10% gain.
Specific Setups to Improve Profitability
When you look at the performance of a descending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Trading descending triangles when the market is in a down trend or consolidating improves your trading results. The sector should be falling to make the most profits. Unusually the trend of the sector at the end of the pattern, prior to the breakout is less important than the sector trend at the start of the pattern.
A breakout from a descending triangle can occur anywhere on the way to the point of the pattern; it is not important exactly where the breakout occurs. The best trades occur when a down side break occurs after the stock bounces off the lower boundary and drops back before hitting the upper boundary.
Ensure that the volume is supportive of the breakout, i.e. volume as the share falls is greater than volume as the share rises.
Trading Descending Triangles Can Be Profitable
Incorporating these simple changes when selecting descending triangles to trade short, dramatically improves the results. With an average return per trade of 2.55% in 10 days and a hit rate of 48% descending triangles are one of the most profitable patterns to trade on the short side.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23204
Descending Triangles, Surprise On The Upside
The descending triangle does break down more than it breaks up with this occurring in 57% of the patterns. A downside breakout is profitable 45% of the time delivering an average profit of 0.92% in 9 days. A large number of downside breakouts (12.1%) return in excess of 10% gain.
Specific Setups to Improve Profitability
When you look at the performance of a descending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Trading descending triangles when the market is in a down trend or consolidating improves your trading results. The sector should be falling to make the most profits. Unusually the trend of the sector at the end of the pattern, prior to the breakout is less important than the sector trend at the start of the pattern.
A breakout from a descending triangle can occur anywhere on the way to the point of the pattern; it is not important exactly where the breakout occurs. The best trades occur when a down side break occurs after the stock bounces off the lower boundary and drops back before hitting the upper boundary.
Ensure that the volume is supportive of the breakout, i.e. volume as the share falls is greater than volume as the share rises.
Trading Descending Triangles Can Be Profitable
Incorporating these simple changes when selecting descending triangles to trade short, dramatically improves the results. With an average return per trade of 2.55% in 10 days and a hit rate of 48% descending triangles are one of the most profitable patterns to trade on the short side.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23204
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 9:57 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home