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 are definitely not one of the most predictable patterns that are available to trade short. With just 45% of the patterns breaking down symmetrical triangles also don't deliver good returns when they do. The average drop is 0.33% in 9 days with less than half of the breakouts (44%) being profitable. These results are not great, but selecting the right conditions can make trading symmetrical triangles better.
Specific Setups to Improve Profitability
When you look at the performance of a symmetrical triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. The market, sector and stock should be in a down trend or consolidating to make the best profits.
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 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.
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. - 23212
Symmetrical Triangles Can Be Traded Short
Symmetrical triangles are definitely not one of the most predictable patterns that are available to trade short. With just 45% of the patterns breaking down symmetrical triangles also don't deliver good returns when they do. The average drop is 0.33% in 9 days with less than half of the breakouts (44%) being profitable. These results are not great, but selecting the right conditions can make trading symmetrical triangles better.
Specific Setups to Improve Profitability
When you look at the performance of a symmetrical triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. The market, sector and stock should be in a down trend or consolidating to make the best profits.
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 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.
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. - 23212
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 @ 12:41 AM
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