Tips for Trading Descending Triangles Long
The descending triangle 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 converge to a point. The top line slopes down toward the bottom line which is horizontal.
Descending Triangles, Ok To Trade
The breakout of the descending triangle would be expected to be down, but a strong support level causes 43% of the patterns to break to the upside. The upside breakout of descending triangles can deliver positive returns with 41% of the patterns being profitable. The average return for the long trades is 0.87% in 8 days. So it is not the best pattern to trade long, but could be profitable.
Specific Setups to Improve Profitability
When you look at the performance of a descending triangle in bearish market conditions you will see the results were not as strong as they were in more bullish years. Trading descending triangles when both the sector and the market, are in an up trend or consolidating improves your trading results. Because of the shape of the pattern the share will naturally be in a down trend so in effect you are entering a retracement in the share during a bullish market phase.
Descending triangles that breakout early in the pattern, produce inferior results. A breakout is better if it occurs after the pattern gets 30% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 2% when compared to the stock price.
Descending triangles with two highs at the same price or two closes at the same price should be avoided, as this usually occurs in an illiquid stock. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.
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 1.45% in 10 days and is profitable on 51% of the trades. Overall this makes descending triangles attractive 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. - 23200
Descending Triangles, Ok To Trade
The breakout of the descending triangle would be expected to be down, but a strong support level causes 43% of the patterns to break to the upside. The upside breakout of descending triangles can deliver positive returns with 41% of the patterns being profitable. The average return for the long trades is 0.87% in 8 days. So it is not the best pattern to trade long, but could be profitable.
Specific Setups to Improve Profitability
When you look at the performance of a descending triangle in bearish market conditions you will see the results were not as strong as they were in more bullish years. Trading descending triangles when both the sector and the market, are in an up trend or consolidating improves your trading results. Because of the shape of the pattern the share will naturally be in a down trend so in effect you are entering a retracement in the share during a bullish market phase.
Descending triangles that breakout early in the pattern, produce inferior results. A breakout is better if it occurs after the pattern gets 30% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 2% when compared to the stock price.
Descending triangles with two highs at the same price or two closes at the same price should be avoided, as this usually occurs in an illiquid stock. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.
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 1.45% in 10 days and is profitable on 51% of the trades. Overall this makes descending triangles attractive 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. - 23200
About the Author:
Jeff Cartridge has been trading CFDs since 2002and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 4:46 AM
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