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, Not Usually Traded Short
The symmetrical triangle can be traded both long and short and when it does break down, historically 45% of the time, it can be profitable. A symmetrical triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades being profitable. The average profits are just 0.33% in 9 days.
Improve Your Trades
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.
Very few trades break down at the start of the pattern, but those that break in the first 30% of the pattern should be avoided. Another key to picking successful short breakouts from symmetrical triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away. This is not a prerequisite, but does produce better trades.
If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up. Better breakouts occur when the stock closes lower than the previous day.
Symmetrical Triangles Profitable on the Short Side as Well
Incorporating these simple changes when selecting symmetrical triangles to trade short, dramatically improves the results. With an average return per trade of 1.58% in 9 days and a hit rate of 47% it is possible for symmetrical triangles to be traded short successfully.
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. - 23208
Symmetrical Triangles, Not Usually Traded Short
The symmetrical triangle can be traded both long and short and when it does break down, historically 45% of the time, it can be profitable. A symmetrical triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades being profitable. The average profits are just 0.33% in 9 days.
Improve Your Trades
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.
Very few trades break down at the start of the pattern, but those that break in the first 30% of the pattern should be avoided. Another key to picking successful short breakouts from symmetrical triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away. This is not a prerequisite, but does produce better trades.
If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up. Better breakouts occur when the stock closes lower than the previous day.
Symmetrical Triangles Profitable on the Short Side as Well
Incorporating these simple changes when selecting symmetrical triangles to trade short, dramatically improves the results. With an average return per trade of 1.58% in 9 days and a hit rate of 47% it is possible for symmetrical triangles to be traded short successfully.
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. - 23208
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 4:04 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home