Ascending Triangles -Short Trading Strategy
Ascending triangles have been very popular with traders on the long side and are not so often traded when it breaks in the downward direction. An ascending triangle is defined by two lines, one on the upper boundary of the price movement which is horizontal and one on the lower side which slopes up.
Ascending Triangles, Not Usually Traded Short
Most ascending triangles would be expected to break up and most of the time this is true, but 36% break out to the downside making it possible to trade on the short side. Just 44% of these breakouts are profitable and on average the profit per trade is only 0.31% over a period of 9 days. The ascending triangle is not one of the best chart patterns when it breaks to the downside, but applying some filters can make this pattern more attractive to trade.
Refine Your Entries
Short breakouts from ascending triangles work better in falling markets which is clear from the results that were achieved in 2000, 2002 and 2008. The best short trades occur at market turning points. The market and the stock should be in an up trend or consolidating, with the sector consolidating or falling for the best results when trading ascending triangles short.
A breakout from an ascending triangle is best if it occurs later in the pattern, in fact all the way to the point of the pattern is good, but not near the start. 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 an ascending 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.
Short Trading Ascending Triangles Can Be Profitable
Incorporating these simple changes when selecting ascending triangles to trade short, dramatically improves the results. With an average return per trade of 1.07% in 10 days and a hit rate of 52% it is possible for ascending triangles to be traded short successfully.
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. - 23217
Ascending Triangles, Not Usually Traded Short
Most ascending triangles would be expected to break up and most of the time this is true, but 36% break out to the downside making it possible to trade on the short side. Just 44% of these breakouts are profitable and on average the profit per trade is only 0.31% over a period of 9 days. The ascending triangle is not one of the best chart patterns when it breaks to the downside, but applying some filters can make this pattern more attractive to trade.
Refine Your Entries
Short breakouts from ascending triangles work better in falling markets which is clear from the results that were achieved in 2000, 2002 and 2008. The best short trades occur at market turning points. The market and the stock should be in an up trend or consolidating, with the sector consolidating or falling for the best results when trading ascending triangles short.
A breakout from an ascending triangle is best if it occurs later in the pattern, in fact all the way to the point of the pattern is good, but not near the start. 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 an ascending 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.
Short Trading Ascending Triangles Can Be Profitable
Incorporating these simple changes when selecting ascending triangles to trade short, dramatically improves the results. With an average return per trade of 1.07% in 10 days and a hit rate of 52% it is possible for ascending triangles to be traded short successfully.
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. - 23217
About the Author:
Jeff Cartridge has been trading chart patterns since 1998 and created the website LearnCFDs.com My Results with This Controversial Pattern Strategy
posted by X - Men @ 2:01 AM
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