Tips for Trading Rectangles Long with CFDs
Rectangles have been very popular with traders over the years trading the chart pattern when it breaks out in either direction. A rectangle is defined by two lines, one on the upper boundary of the price movement and one on the lower boundary, both of which are horizontal. The lines are parallel. These can be referred to as consolidations or channels, or the well known Darvas Box, used by Nicolas Darvas to make $2 million in the markets.
Rectangles, A Traders Favourite Pattern?
Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.
Improve Your Trades
A break to the upside works better in a rising or consolidating market. By using filters that require the market, sector and stock to be in a consolidation or an up trend you can improve the results.
Rectangles are not dependent on where in the pattern the breakout occurs. The length of a rectangle is important with patterns that are longer than 10 days and less then 35 days producing better results.
If the volume is in support of the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down. The best results are achieved if the high is higher or equal before the breakout and do not trade patterns that are formed around an outside day candle.
Rectangles Deliver Strong Profits
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of rectangles delivers an average profit of 1.89% in 13 days and is profitable on a very high 71% of the trades. Overall this makes rectangles 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. - 23167
Rectangles, A Traders Favourite Pattern?
Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.
Improve Your Trades
A break to the upside works better in a rising or consolidating market. By using filters that require the market, sector and stock to be in a consolidation or an up trend you can improve the results.
Rectangles are not dependent on where in the pattern the breakout occurs. The length of a rectangle is important with patterns that are longer than 10 days and less then 35 days producing better results.
If the volume is in support of the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down. The best results are achieved if the high is higher or equal before the breakout and do not trade patterns that are formed around an outside day candle.
Rectangles Deliver Strong Profits
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of rectangles delivers an average profit of 1.89% in 13 days and is profitable on a very high 71% of the trades. Overall this makes rectangles 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. - 23167
About the Author:
Jeff Cartridge has been trading CFDs since 2002 and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 3:01 AM
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