Tips for Trading Symmetrical Triangles Short with CFDs
The symmetrical 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 slopes down. Both lines have nearly the same slope as each other which is why the pattern is called symmetrical.
Symmetrical Triangles, Not Usually Traded Short
The symmetrical triangle can be traded both long and short and when it does break down, historically 45% of the time, it can be profitable. A symmetrical triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades being profitable. The average profits are just 0.33% in 9 days.
Refine Your Entries
When you look at the performance of a symmetrical triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. The market, sector and stock should be in a down trend or consolidating to make the best profits.
Very few trades break down at the start of the pattern, but those that break in the first 30% of the pattern should be avoided. Another key to picking successful short breakouts from symmetrical triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away. This is not a prerequisite, but does produce better trades.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises. One last filter that improves the results is to look for the share to close lower prior to the breakout.
Symmetrical Triangles Can Be Profitable
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of symmetrical triangles delivers an average profit of 1.58% in 9 days and is profitable on 47% of the trades. Overall this makes symmetrical triangles attractive to trade on the short side.
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
Symmetrical Triangles, Not Usually Traded Short
The symmetrical triangle can be traded both long and short and when it does break down, historically 45% of the time, it can be profitable. A symmetrical triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades being profitable. The average profits are just 0.33% in 9 days.
Refine Your Entries
When you look at the performance of a symmetrical triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. The market, sector and stock should be in a down trend or consolidating to make the best profits.
Very few trades break down at the start of the pattern, but those that break in the first 30% of the pattern should be avoided. Another key to picking successful short breakouts from symmetrical triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away. This is not a prerequisite, but does produce better trades.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises. One last filter that improves the results is to look for the share to close lower prior to the breakout.
Symmetrical Triangles Can Be Profitable
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of symmetrical triangles delivers an average profit of 1.58% in 9 days and is profitable on 47% of the trades. Overall this makes symmetrical triangles attractive to trade on the short side.
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 A Simple Timeless Method for Huge Gains
posted by X - Men @ 4:03 AM
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