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
Descending triangles are one of the most predictable patterns that are available to trade short. With 57% of the patterns breaking down descending triangles can deliver good returns when they do. The average gain is 0.92% in 9 days with about half of the breakouts (45%) being profitable. These results are good but selecting the right conditions can make trading descending triangles very attractive.
Specific Setups to Improve Profitability
A break to the downside works better in a falling market or sector environment. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The sector should also be in a down trend for the best results. Strangely a sector that is in a down trend at the beginning of the pattern produces better results than a sector in a down trend when the breakout occurs.
Breakouts can occur anywhere along the length of the descending triangle pattern. Another key to picking successful short breakouts from descending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.
If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.
Descending Triangles, Profitable When the Markets Is Not
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 2.55% in 10 days and is profitable on 48% of the trades. Overall this makes descending triangles extremely attractive to trade.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23218
Descending Triangles, Surprise On The Upside
Descending triangles are one of the most predictable patterns that are available to trade short. With 57% of the patterns breaking down descending triangles can deliver good returns when they do. The average gain is 0.92% in 9 days with about half of the breakouts (45%) being profitable. These results are good but selecting the right conditions can make trading descending triangles very attractive.
Specific Setups to Improve Profitability
A break to the downside works better in a falling market or sector environment. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The sector should also be in a down trend for the best results. Strangely a sector that is in a down trend at the beginning of the pattern produces better results than a sector in a down trend when the breakout occurs.
Breakouts can occur anywhere along the length of the descending triangle pattern. Another key to picking successful short breakouts from descending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.
If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.
Descending Triangles, Profitable When the Markets Is Not
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 2.55% in 10 days and is profitable on 48% of the trades. Overall this makes descending triangles extremely attractive to trade.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23218
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 @ 4:02 AM
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