Descending Triangles -Short Trading Strategy
The descending triangle can be traded very successfully 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 top line slopes down toward the bottom line which is horizontal.
Descending Triangles Best Traded Short
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.
Improve Your Trades
When you look at the performance of a descending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Trading descending triangles when the market is in a down trend or consolidating improves your trading results. The sector should be falling to make the best profits. Unusually the trend of the sector at the end of the pattern, prior to the breakout is less important than the sector trend at the start of the pattern.
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.
If volume supports a descending triangle breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going down should be greater than volume when the stock is going up.
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. - 23210
Descending Triangles Best Traded Short
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.
Improve Your Trades
When you look at the performance of a descending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Trading descending triangles when the market is in a down trend or consolidating improves your trading results. The sector should be falling to make the best profits. Unusually the trend of the sector at the end of the pattern, prior to the breakout is less important than the sector trend at the start of the pattern.
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.
If volume supports a descending triangle breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going down should be greater than volume when the stock is going up.
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. - 23210
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Ways to Make Serious Money With A Small Investment
posted by X - Men @ 4:26 AM
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