Tips For Trading Ascending Wedges Long With CFDs
The ascending wedge can be traded very successfully on the long side entering the trade as the stock breaks out to the upside. This is not how you would normally trade this pattern though as the text books will tell you to trade it when it breaks down. The pattern forms when the two boundary lines that contain the price movement converge to a point. The top line slopes up, and the bottom line slopes up even steeper to meet the top line.
Ascending Wedges, Unexpected Returns
Most ascending wedges would be expected to break down but, in fact 68%, break out to the upside making this pattern tradable on the long side. And what is more 48% of these breakouts are profitable and on average the profit per trade is 0.94% over a period of 9 days. The ascending wedge is not the best chart pattern when it breaks to the upside, but applying some filters makes this pattern attractive to trade.
Improve Your Trades
A break to the upside works better in strange market conditions. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The stock and the sector should be in a down trend or a consolidation for the best results. Profitable entries tend to occur when there is a pull back in the share and sector in a market up trend.
Ascending wedges that breakout late in the pattern, produce inferior results. A breakout is better if it occurs before the pattern gets 80% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 6% when compared to the stock price as well as avoiding patterns that take more than 44 days to form.
Avoid ascending wedges where there are two consecutive closes at the same level prior to the breakout. These are often signs of an illiquid stock. The pattern works better if the low is less than or equal to the previous day prior to the breakout. Ensure that the volume is supportive of the breakout, i.e. volume as the stock rises is greater than volume as the stock falls.
Trading Ascending Wedges Can Be Profitable
You can improve your trading results by using a series of filters that have been outlined here. This select group of ascending wedges delivers an average profit of 1.89% in 8 days and is profitable on 52% of the trades. Overall this makes ascending wedges 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. - 23221
Ascending Wedges, Unexpected Returns
Most ascending wedges would be expected to break down but, in fact 68%, break out to the upside making this pattern tradable on the long side. And what is more 48% of these breakouts are profitable and on average the profit per trade is 0.94% over a period of 9 days. The ascending wedge is not the best chart pattern when it breaks to the upside, but applying some filters makes this pattern attractive to trade.
Improve Your Trades
A break to the upside works better in strange market conditions. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The stock and the sector should be in a down trend or a consolidation for the best results. Profitable entries tend to occur when there is a pull back in the share and sector in a market up trend.
Ascending wedges that breakout late in the pattern, produce inferior results. A breakout is better if it occurs before the pattern gets 80% of the way to the point of the pattern. Shallow patterns are also best avoided, where the pattern height is less than 6% when compared to the stock price as well as avoiding patterns that take more than 44 days to form.
Avoid ascending wedges where there are two consecutive closes at the same level prior to the breakout. These are often signs of an illiquid stock. The pattern works better if the low is less than or equal to the previous day prior to the breakout. Ensure that the volume is supportive of the breakout, i.e. volume as the stock rises is greater than volume as the stock falls.
Trading Ascending Wedges Can Be Profitable
You can improve your trading results by using a series of filters that have been outlined here. This select group of ascending wedges delivers an average profit of 1.89% in 8 days and is profitable on 52% of the trades. Overall this makes ascending wedges 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. - 23221
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Ways to Make Serious Money With A Small Investment
posted by X - Men @ 2:28 AM
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