Trading Strategy - Descending Triangles Downside Breakout
The descending triangle is the most profitable chart pattern when trading short. The descending triangle is formed with the lower boundary of the price movement contained by a line close to horizontal and the top line slopes down toward the bottom line.
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.
Specific Setups to Improve Profitability
A break to the downside works better in a falling market or sector environment. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The sector should also be in a down trend for the best results. Strangely a sector that is in a down trend at the beginning of the pattern produces better results than a sector in a down trend when the breakout occurs.
Breakouts can occur anywhere along the length of the descending triangle pattern. Another key to picking successful short breakouts from descending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.
Ensure that the volume is supportive of the breakout, i.e. volume as the share falls is greater than volume as the share rises.
Descending Triangles, Profitable When the Markets Is Not
Incorporating these simple changes when selecting descending triangles to trade short, dramatically improves the results. With an average return per trade of 2.55% in 10 days and a hit rate of 48% descending triangles are one of the most profitable patterns to trade on the short side.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23221
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.
Specific Setups to Improve Profitability
A break to the downside works better in a falling market or sector environment. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The sector should also be in a down trend for the best results. Strangely a sector that is in a down trend at the beginning of the pattern produces better results than a sector in a down trend when the breakout occurs.
Breakouts can occur anywhere along the length of the descending triangle pattern. Another key to picking successful short breakouts from descending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.
Ensure that the volume is supportive of the breakout, i.e. volume as the share falls is greater than volume as the share rises.
Descending Triangles, Profitable When the Markets Is Not
Incorporating these simple changes when selecting descending triangles to trade short, dramatically improves the results. With an average return per trade of 2.55% in 10 days and a hit rate of 48% descending triangles are one of the most profitable patterns to trade on the short side.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23221
About the Author:
Jeff Cartridge has been trading CFDs since 2002 and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 12:44 AM
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