CFD Trading Strategy - Symmetrical Triangles Downside Breakout
Symmetrical triangles have been very popular with traders over the years trading the chart pattern when it breaks out in either direction. A symmetrical triangle is defined by two lines, one on the upper boundary of the price movement which slopes down and one on the lower side which slopes up. The lines have almost the same angle, hence 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.
Refine Your Entries
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.
Symmetrical triangles that breakout early in the pattern, which is not many, produce inferior results to those that breakout later. The best results are achieved when the stock climbs up from the lower boundary and collapses back before reaching the upper boundary of the pattern.
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.
Short Trading Symmetrical Triangles Can Be Profitable
Following a series of simple rules to determine which symmetrical triangle to trade can improve results dramatically. By applying these filters symmetrical triangles are profitable on 47% of the trades and return an average of 1.58% per trade in 9 days. This is a profitable pattern 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. - 23221
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.
Refine Your Entries
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.
Symmetrical triangles that breakout early in the pattern, which is not many, produce inferior results to those that breakout later. The best results are achieved when the stock climbs up from the lower boundary and collapses back before reaching the upper boundary of the pattern.
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.
Short Trading Symmetrical Triangles Can Be Profitable
Following a series of simple rules to determine which symmetrical triangle to trade can improve results dramatically. By applying these filters symmetrical triangles are profitable on 47% of the trades and return an average of 1.58% per trade in 9 days. This is a profitable pattern 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. - 23221
About the Author:
Jeff Cartridge is the author of Supercharge Your Trading with CFDs and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 12:16 PM
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