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.
Specific Setups to Improve Profitability
Short breakouts work better in falling markets which is clear from the results that were achieved in 2002 and 2008, so the market should be falling or consolidating. The best results are achieved trading descending triangles when the sector is falling. For some reason the trend of the sector at the start of the pattern is more important than the trend of the sector prior to the breakout.
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 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.
Trading Descending Triangles Can Be Profitable
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 2.55% in 10 days and is profitable on 48% of the trades. Overall this makes descending triangles extremely attractive to trade.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23229
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.
Specific Setups to Improve Profitability
Short breakouts work better in falling markets which is clear from the results that were achieved in 2002 and 2008, so the market should be falling or consolidating. The best results are achieved trading descending triangles when the sector is falling. For some reason the trend of the sector at the start of the pattern is more important than the trend of the sector prior to the breakout.
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 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.
Trading Descending Triangles Can Be Profitable
You can improve your trading results by using a series of simple filters that have been outlined here. This select group of descending triangles delivers an average profit of 2.55% in 10 days and is profitable on 48% of the trades. Overall this makes descending triangles extremely attractive to trade.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23229
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 12:48 AM
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