Trading Strategy - Ascending Triangles Downside Breakout
The ascending triangle can be traded on the short side entering the trade as the stock breaks out of the pattern to the downside. The pattern forms when the two boundary lines that contain the price movement converge to a point. The bottom line slopes up toward the top line which is horizontal.
Ascending Triangles Can Be Profitable Short
Ascending triangles are definitely not one of the most predictable patterns that are available to trade short. With just 36% of the patterns breaking down ascending triangles also don't deliver good returns when they do. The average drop is 0.31% in 9 days with about half of the breakouts (44%) being profitable. These results aren't great, but selecting the right conditions can make trading ascending triangles better.
Refine Your Entries
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.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises.
Short Trading Ascending Triangles Can Be Profitable
Incorporating these simple changes when selecting ascending triangles to trade short, dramatically improves the results. With an average return per trade of 1.07% in 10 days and a hit rate of 52% it is possible for ascending triangles to be traded short successfully.
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. - 23223
Ascending Triangles Can Be Profitable Short
Ascending triangles are definitely not one of the most predictable patterns that are available to trade short. With just 36% of the patterns breaking down ascending triangles also don't deliver good returns when they do. The average drop is 0.31% in 9 days with about half of the breakouts (44%) being profitable. These results aren't great, but selecting the right conditions can make trading ascending triangles better.
Refine Your Entries
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.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises.
Short Trading Ascending Triangles Can Be Profitable
Incorporating these simple changes when selecting ascending triangles to trade short, dramatically improves the results. With an average return per trade of 1.07% in 10 days and a hit rate of 52% it is possible for ascending triangles to be traded short successfully.
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. - 23223
About the Author:
Jeff Cartridge has been trading CFDs since 2002 and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 9:04 AM
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