Tips for Trading Symmetrical Triangles Short with CFDs
The symmetrical triangle is sometimes referred to as a wedge. It is a very well known and easily recognized chart pattern that has been used by many successful traders over the years. A symmetrical triangle is formed when the price action is contained within two lines. The top line slopes down while the bottom line slopes up towards the top line. The angle of the two lines is similar giving rise to the name symmetrical.
Symmetrical Triangles Can Be Traded Short
Symmetrical triangles provide no clear breakout direction, but 45% 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 0.33% over a period of 9 days. The symmetrical 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.
Improve Your Trades
As you would expect a break to the downside works better in a falling sector and market environment. By using filters that require the market, stock and the sector to be in a consolidation or a down trend you can improve the results.
A breakout from a symmetrical triangle is best if it occurs later in the pattern, 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 a symmetrical 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. A close lower than the previous day, before the breakout, results in better trades.
Symmetrical Triangles Can Be Profitable
Incorporating these simple changes when selecting symmetrical triangles to trade short, dramatically improves the results. With an average return per trade of 1.58% in 9 days and a hit rate of 47% it is possible for symmetrical 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. - 23310
Symmetrical Triangles Can Be Traded Short
Symmetrical triangles provide no clear breakout direction, but 45% 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 0.33% over a period of 9 days. The symmetrical 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.
Improve Your Trades
As you would expect a break to the downside works better in a falling sector and market environment. By using filters that require the market, stock and the sector to be in a consolidation or a down trend you can improve the results.
A breakout from a symmetrical triangle is best if it occurs later in the pattern, 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 a symmetrical 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. A close lower than the previous day, before the breakout, results in better trades.
Symmetrical Triangles Can Be Profitable
Incorporating these simple changes when selecting symmetrical triangles to trade short, dramatically improves the results. With an average return per trade of 1.58% in 9 days and a hit rate of 47% it is possible for symmetrical 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. - 23310
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Trading Chart Patterns - All The Insider Tricks
posted by Mr. Forex at
3:36 PM
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