Tips for Trading Descending Triangles Short
Descending triangles are not so popular with traders on the long side and are best traded when it breaks in the downward direction. A descending triangle is defined by two lines, one on the lower boundary of the price movement which is horizontal and one on the upper side which slopes down.
Descending Triangles Best Traded Short
The descending triangle does break down more than it breaks up with this occurring in 57% of the patterns. A downside breakout is profitable 45% of the time delivering an average profit of 0.92% in 9 days. A large number of downside breakouts (12.1%) return in excess of 10% gain.
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.
Descending triangles that breakout early in the pattern, produce similar results to those that breakout later, so this is not an important filter to use. The best results are achieved when the stock climbs up from the lower boundary and collapses back before reaching the upper boundary of the pattern.
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.
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. - 23217
Descending Triangles Best Traded Short
The descending triangle does break down more than it breaks up with this occurring in 57% of the patterns. A downside breakout is profitable 45% of the time delivering an average profit of 0.92% in 9 days. A large number of downside breakouts (12.1%) return in excess of 10% gain.
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.
Descending triangles that breakout early in the pattern, produce similar results to those that breakout later, so this is not an important filter to use. The best results are achieved when the stock climbs up from the lower boundary and collapses back before reaching the upper boundary of the pattern.
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.
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. - 23217
About the Author:
Jeff Cartridge has been trading chart patterns since 1998 and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 4:18 AM
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