Tips for Trading Ascending Wedges Short with CFDs
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 Best Traded Long
Most ascending wedges would be expected to break down but in reality just 32%, break out to the downside making this pattern better when traded on the long side. 42% of these breakouts are profitable and on average the profit per trade is a meager 0.02% over a period of 8 days. The ascending wedge is certainly not one of the best chart patterns when it breaks to the downside, but applying some filters makes this pattern more attractive to trade.
Improve Your Trades
Trading ascending wedges when the stock and the market are in an up trend or consolidating improves your trading results. The sector should be falling or in consolidation to make the best profits.
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.
Ascending Wedges, Selectively 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.
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
Ascending Wedges Best Traded Long
Most ascending wedges would be expected to break down but in reality just 32%, break out to the downside making this pattern better when traded on the long side. 42% of these breakouts are profitable and on average the profit per trade is a meager 0.02% over a period of 8 days. The ascending wedge is certainly not one of the best chart patterns when it breaks to the downside, but applying some filters makes this pattern more attractive to trade.
Improve Your Trades
Trading ascending wedges when the stock and the market are in an up trend or consolidating improves your trading results. The sector should be falling or in consolidation to make the best profits.
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.
Ascending Wedges, Selectively 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.
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 the author of Supercharge Your Trading with CFDs and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 8:00 AM
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