Rectangles - Long Trading Strategy with CFDs
The rectangle can be traded very successfully on the long side entering the trade as the stock breaks out to the upside. The pattern forms when the two boundary lines that contain the price movement are parallel. The bottom line and the top line are both near to horizontal. Sometimes these may be called a channel or a consolidation, but the most famous version of this pattern was a variation by Nicolas Darvas, published in his book ?How I Made $2 million in the Stock Market?.
Rectangles, Unpredictable But Profitable
Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.
Refine Your Entries
When you look at the performance of a rectangle the pattern works better when the market is rising. Trading rectangles when the market is in an up trend or consolidating improves your trading results. If the sector and the stock are consolidating or rising this also improves the performance of the pattern.
The location of a breakout from a rectangle is unimportant. If it breaks out early in the pattern it will produce similiar results as if it breaks out later. Patterns that have a length of between 10 days ? 35 days produce better returns.
Volume is important with rectangles ensure that the volume is supportive of the breakout with the volume as the share rises more than volume as the share falls. Avoid patterns that have lower highs prior to the breakout or the last turning point is formed by a single outside candle.
Rectangles Can Be Very Profitable
Following a series of simple rules to determine which rectangle to trade can improve results dramatically. By applying these filters rectangles are profitable on a stunning 71% of the trades and return an average of 1.89% per trade in 13 days. This is a very predictable 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
Rectangles, Unpredictable But Profitable
Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.
Refine Your Entries
When you look at the performance of a rectangle the pattern works better when the market is rising. Trading rectangles when the market is in an up trend or consolidating improves your trading results. If the sector and the stock are consolidating or rising this also improves the performance of the pattern.
The location of a breakout from a rectangle is unimportant. If it breaks out early in the pattern it will produce similiar results as if it breaks out later. Patterns that have a length of between 10 days ? 35 days produce better returns.
Volume is important with rectangles ensure that the volume is supportive of the breakout with the volume as the share rises more than volume as the share falls. Avoid patterns that have lower highs prior to the breakout or the last turning point is formed by a single outside candle.
Rectangles Can Be Very Profitable
Following a series of simple rules to determine which rectangle to trade can improve results dramatically. By applying these filters rectangles are profitable on a stunning 71% of the trades and return an average of 1.89% per trade in 13 days. This is a very predictable 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 is a private trader and created the website LearnCFDs.com Trading Chart Patterns - All The Insider Tricks
posted by X - Men @ 3:22 AM
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