Ascending Wedges - Short CFD Trading Strategy
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, Marginally Profitable
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
Surprisingly short breakouts work well in rising markets so the market, as well as the stock, should be rising or consolidating. The best results are achieved trading ascending wedges when the sector is falling or consolidating. So if the trend of the sector turns down, this sets up the best short trades.
Ascending wedges that breakout early in the pattern, produce similar results to those that breakout later, so this is not an important filter to use. Mid range patterns with a length less than 30 days and more than 5 days produce the best results.
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. If the stock closes at the same level as the previous day, prior to the breakout, it will produce inferior results. Look for falling lows or highs, however as this does improve the profitability.
Trading Ascending Wedges Can Be Profitable
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. - 23212
Ascending Wedges, Marginally Profitable
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
Surprisingly short breakouts work well in rising markets so the market, as well as the stock, should be rising or consolidating. The best results are achieved trading ascending wedges when the sector is falling or consolidating. So if the trend of the sector turns down, this sets up the best short trades.
Ascending wedges that breakout early in the pattern, produce similar results to those that breakout later, so this is not an important filter to use. Mid range patterns with a length less than 30 days and more than 5 days produce the best results.
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. If the stock closes at the same level as the previous day, prior to the breakout, it will produce inferior results. Look for falling lows or highs, however as this does improve the profitability.
Trading Ascending Wedges Can Be Profitable
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. - 23212
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 10:36 AM
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