CFD Trading Strategy - Ascending Wedges Downside Breakout
Ascending wedges traditionally have been popular with traders on the short side and are not so often traded when it breaks in the upward direction. The data we have collected suggests this is not the best approach. An ascending wedge is defined by two lines, one on the lower boundary of the price movement which slopes up steeply towards the line on the upper side which also slopes up at a less of an angle.
Ascending Wedges Profitable, No Surprise
Ascending wedges are one of the least predictable patterns that are available to trade short. With just 32% of the patterns breaking down, ascending wedges struggle to deliver good returns when they do. The average gain is 0.02% in 8 days with less than half of the breakouts (42%) being profitable. These results are marginal and barely profitable, but selecting the right conditions can make trading ascending wedges attractive.
Improve Your Trades
Surprisingly short breakouts work well in rising markets so the market, as well as the stock, should be rising or consolidating. The best results are achieved trading ascending wedges when the sector is falling or consolidating. So if the trend of the sector turns down, this sets up the best short trades.
Ascending wedges that breakout early in the pattern, produce similar results to those that breakout later, so this is not an important filter to use. Mid range patterns with a length less than 30 days and more than 5 days produce the best results.
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. If the stock closes at the same level as the previous day, prior to the breakout, it will produce inferior results. Look for falling lows or highs, however as this does improve the profitability.
Trading Ascending Wedges Can Be Profitable
Incorporating these filters when selecting ascending wedges to trade short, dramatically improves the results. It also significantly reduces the number of trades to 74 from 1275, before the filters are applied. With an average return per trade of 1.46% in 10 days and a hit rate of 48% ascending wedges can be profitable when traded short, but selecting the right patterns can be challenging.
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. - 23218
Ascending Wedges Profitable, No Surprise
Ascending wedges are one of the least predictable patterns that are available to trade short. With just 32% of the patterns breaking down, ascending wedges struggle to deliver good returns when they do. The average gain is 0.02% in 8 days with less than half of the breakouts (42%) being profitable. These results are marginal and barely profitable, but selecting the right conditions can make trading ascending wedges attractive.
Improve Your Trades
Surprisingly short breakouts work well in rising markets so the market, as well as the stock, should be rising or consolidating. The best results are achieved trading ascending wedges when the sector is falling or consolidating. So if the trend of the sector turns down, this sets up the best short trades.
Ascending wedges that breakout early in the pattern, produce similar results to those that breakout later, so this is not an important filter to use. Mid range patterns with a length less than 30 days and more than 5 days produce the best results.
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. If the stock closes at the same level as the previous day, prior to the breakout, it will produce inferior results. Look for falling lows or highs, however as this does improve the profitability.
Trading Ascending Wedges Can Be Profitable
Incorporating these filters when selecting ascending wedges to trade short, dramatically improves the results. It also significantly reduces the number of trades to 74 from 1275, before the filters are applied. With an average return per trade of 1.46% in 10 days and a hit rate of 48% ascending wedges can be profitable when traded short, but selecting the right patterns can be challenging.
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. - 23218
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 @ 2:08 AM
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