Tips for Trading Rising Channels Long With CFDs
The rising channel is a well known chart pattern that you would expect to trade on the short side, but can also be traded if it breaks out to the upside. A rising channel is formed when the price action is contained within two lines. Both the bottom line and the top line slope up, with both lines near to parallel.
Rising Channel, Unexpected Returns
Rising channels are normally patterns that would be considered to trade on the short side, but also can perform on the upside. 51% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.53% in 8 days with under half of the breakouts (40%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading a rising channel attractive.
Improve Your Trades
A long breakout from a rising channel works better in bullish market conditions. A rising or consolidating market is beneficial and the sector environment should not be in consolidation, but rising or falling. The stock should also be falling or consolidating. Essentially you are best trading the rising channel long when the stock has a pull back in a bullish market environment.
Rising channel patterns with a very tall height relative to the share price (10% or more) produce smaller returns along with very long patterns (40 days or more). When a rising channel forms around one large candle that reaches both boundaries it produces inferior results.
Illiquid stock can sometimes be identified by two identical lows, closes or highs and if this is the case you are better to avoid these trades. If volume supports a rising channel breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going up should be greater than volume when the stock is going down.
Trading Rising Channel Can Be Profitable
You can improve your trading results by using a series of filters that have been outlined here. This select group of rising channel delivers an average profit of 2.11% in 10 days and is profitable on 63% of the trades. Overall this makes rising channel attractive to trade, but these filters do significantly reduce the number of trading opportunities.
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
Rising Channel, Unexpected Returns
Rising channels are normally patterns that would be considered to trade on the short side, but also can perform on the upside. 51% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.53% in 8 days with under half of the breakouts (40%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading a rising channel attractive.
Improve Your Trades
A long breakout from a rising channel works better in bullish market conditions. A rising or consolidating market is beneficial and the sector environment should not be in consolidation, but rising or falling. The stock should also be falling or consolidating. Essentially you are best trading the rising channel long when the stock has a pull back in a bullish market environment.
Rising channel patterns with a very tall height relative to the share price (10% or more) produce smaller returns along with very long patterns (40 days or more). When a rising channel forms around one large candle that reaches both boundaries it produces inferior results.
Illiquid stock can sometimes be identified by two identical lows, closes or highs and if this is the case you are better to avoid these trades. If volume supports a rising channel breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going up should be greater than volume when the stock is going down.
Trading Rising Channel Can Be Profitable
You can improve your trading results by using a series of filters that have been outlined here. This select group of rising channel delivers an average profit of 2.11% in 10 days and is profitable on 63% of the trades. Overall this makes rising channel attractive to trade, but these filters do significantly reduce the number of trading opportunities.
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 chart patterns since 1998 and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 7:03 AM
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