Tips for Trading Ascending Wedges Short with CFDs
Ascending wedges traditionally have been popular with traders on the short side and are not so often traded when it breaks in the upward direction. The data we have collected suggests this is not the best approach. An ascending wedge is defined by two lines, one on the lower boundary of the price movement which slopes up steeply towards the line on the upper side which also slopes up at a less of an angle.
Ascending Wedges Best Traded Long
The ascending wedge breaks up more than it breaks down with downside breaks only occurring in 32% of the patterns. A downside breakout is profitable 42% of the time delivering an average profit of just 0.02% in 8 days, it is barely profitable. As with other patterns it can be improved with the addition of filters.
Refine Your Entries
Trading ascending wedges when the stock and the market are in an up trend or consolidating improves your trading results. The sector should be falling or in consolidation to make the best profits.
Breakouts can occur anywhere along the length of the ascending wedge pattern. The best pattern length is between 5 and 30 days, so very short term patterns and very long term patterns are best avoided.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises. Avoid patterns that have two closes the same prior to the breakout as this is often a sign of an illiquid stock. Lower highs or lower lows prior to the breakout produce better results.
Ascending Wedges Profitable Sometimes
You can improve your trading results by using a series of filters that have been outlined here. These filters are harsh, significantly reducing the number of trades to get good results. (1275 trades are reduced to just 74). This select group of ascending wedges delivers an average profit of 1.46% in 10 days and is profitable on 48% of the trades. Overall this makes ascending wedges possible to trade short.
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 Best Traded Long
The ascending wedge breaks up more than it breaks down with downside breaks only occurring in 32% of the patterns. A downside breakout is profitable 42% of the time delivering an average profit of just 0.02% in 8 days, it is barely profitable. As with other patterns it can be improved with the addition of filters.
Refine Your Entries
Trading ascending wedges when the stock and the market are in an up trend or consolidating improves your trading results. The sector should be falling or in consolidation to make the best profits.
Breakouts can occur anywhere along the length of the ascending wedge pattern. The best pattern length is between 5 and 30 days, so very short term patterns and very long term patterns are best avoided.
Ensure that the volume is supportive of the breakout, i.e. volume as the stock falls is greater than volume as the stock rises. Avoid patterns that have two closes the same prior to the breakout as this is often a sign of an illiquid stock. Lower highs or lower lows prior to the breakout produce better results.
Ascending Wedges Profitable Sometimes
You can improve your trading results by using a series of filters that have been outlined here. These filters are harsh, significantly reducing the number of trades to get good results. (1275 trades are reduced to just 74). This select group of ascending wedges delivers an average profit of 1.46% in 10 days and is profitable on 48% of the trades. Overall this makes ascending wedges possible to trade short.
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 Discover Patterns of Success
posted by X - Men @ 2:08 AM
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