Trading Strategy - Ascending Triangles Downside Breakout
The ascending triangle chart pattern is a very well known pattern that has been used by many successful traders over the years on the long side, but is not always traded short. An ascending triangle is formed when the price action is contained within two lines. The top line is close to horizontal while the bottom line slopes up towards the top line.
Ascending Triangles, Not Usually Traded Short
The ascending triangle is not often traded as a short pattern, but when it does break down, historically 36% of the time, it can be profitable. An ascending triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades profitable. The average profits are also less at 0.31% in 9 days.
Improve Your Trades
As you would expect a break to the downside works better in a falling market environment, but the best trades actually occur at market turning points. By using filters that require the market and the stock to be in a consolidation or an up trend, while the sector is in a consolidation or a down trend, you can improve the results.
A breakout from an ascending triangle is best if it occurs later in the pattern, in fact all the way to the point of the pattern is good, but not near the start. 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.
If volume supports an ascending triangle breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going down should be greater than volume when the stock is going up.
Ascending 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 ascending triangles delivers an average profit of 1.07% in 10 days and is profitable on 52% of the trades. Overall this makes ascending triangles mildly attractive 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. - 23167
Ascending Triangles, Not Usually Traded Short
The ascending triangle is not often traded as a short pattern, but when it does break down, historically 36% of the time, it can be profitable. An ascending triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades profitable. The average profits are also less at 0.31% in 9 days.
Improve Your Trades
As you would expect a break to the downside works better in a falling market environment, but the best trades actually occur at market turning points. By using filters that require the market and the stock to be in a consolidation or an up trend, while the sector is in a consolidation or a down trend, you can improve the results.
A breakout from an ascending triangle is best if it occurs later in the pattern, in fact all the way to the point of the pattern is good, but not near the start. 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.
If volume supports an ascending triangle breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going down should be greater than volume when the stock is going up.
Ascending 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 ascending triangles delivers an average profit of 1.07% in 10 days and is profitable on 52% of the trades. Overall this makes ascending triangles mildly attractive 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. - 23167
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Ways to Make Serious Money With A Small Investment
posted by X - Men @ 2:19 AM
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