Descending Triangles -Short Trading Strategy
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, One Of The Best
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.
Refine Your Entries
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 volume supports a descending 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.
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.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23310
Descending Triangles, One Of The Best
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.
Refine Your Entries
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 volume supports a descending 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.
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.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23310
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 Mr. Forex at
5:55 AM
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