Tips for Trading Descending Triangles Short
The descending triangle is the most profitable chart pattern when trading short. The descending triangle is formed with the lower boundary of the price movement contained by a line close to horizontal and the top line slopes down toward the bottom line.
Descending Triangles, Surprise On The Upside
Most descending triangles would be expected to break down and in fact 57%, break out to the downside making this pattern best when traded on the short side. 45% of these breakouts are profitable and on average the profit per trade is 0.92% over a period of 9 days. A good proportion, 12.1% of these breakouts make a profit of 10% or more. The descending triangle is one of the best chart patterns when it breaks to the downside and applying some filters makes this pattern even more attractive to trade.
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.
A breakout from a descending triangle can occur anywhere on the way to the point of the pattern; it is not important exactly where the breakout occurs. 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 share falls is greater than volume as the share rises.
Descending Triangles Extremely Profitable
Following a series of simple rules to determine which descending triangle to trade can improve results dramatically. By applying these filters descending triangles are profitable on 48% of the trades and return an average of 2.55% per trade in 10 days. This is a very profitable pattern 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. - 23196
Descending Triangles, Surprise On The Upside
Most descending triangles would be expected to break down and in fact 57%, break out to the downside making this pattern best when traded on the short side. 45% of these breakouts are profitable and on average the profit per trade is 0.92% over a period of 9 days. A good proportion, 12.1% of these breakouts make a profit of 10% or more. The descending triangle is one of the best chart patterns when it breaks to the downside and applying some filters makes this pattern even more attractive to trade.
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.
A breakout from a descending triangle can occur anywhere on the way to the point of the pattern; it is not important exactly where the breakout occurs. 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 share falls is greater than volume as the share rises.
Descending Triangles Extremely Profitable
Following a series of simple rules to determine which descending triangle to trade can improve results dramatically. By applying these filters descending triangles are profitable on 48% of the trades and return an average of 2.55% per trade in 10 days. This is a very profitable pattern 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. - 23196
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Trading Chart Patterns - All The Insider Tricks
posted by X - Men @ 6:08 AM
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