The ascending triangle chart pattern is a very well known pattern that has been used by many successful traders over the years on the long side, but is not always traded short. An ascending triangle is formed when the price action is contained within two lines. The top line is close to horizontal while the bottom line slopes up towards the top line.
Ascending Triangles Can Be Traded Short
The ascending triangle is not often traded as a short pattern, but when it does break down, historically 36% of the time, it can be profitable. An ascending triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades profitable. The average profits are also less at 0.31% in 9 days.
Specific Setups to Improve Profitability
When you look at the performance of an ascending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Despite this the pattern works the best at turning points, which occur when the stock and the market are in an up trend or consolidating. The sector should be falling or consolidating to make the best profits.
A breakout from an ascending triangle is best if it occurs later in the pattern, in fact all the way to the point of the pattern is good, but not near the start. The best trades occur when a down side break occurs after the stock bounces off the lower boundary and drops back before hitting the upper boundary.
If volume supports an ascending 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.
Short Trading Ascending Triangles Can Be Profitable
Incorporating these simple changes when selecting ascending triangles to trade short, dramatically improves the results. With an average return per trade of 1.07% in 10 days and a hit rate of 52% it is possible for ascending 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. - 23211
Ascending Triangles Can Be Traded Short
The ascending triangle is not often traded as a short pattern, but when it does break down, historically 36% of the time, it can be profitable. An ascending triangle breakout to the downside is not as reliable as a breakout to the upside with only 44% of the trades profitable. The average profits are also less at 0.31% in 9 days.
Specific Setups to Improve Profitability
When you look at the performance of an ascending triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. Despite this the pattern works the best at turning points, which occur when the stock and the market are in an up trend or consolidating. The sector should be falling or consolidating to make the best profits.
A breakout from an ascending triangle is best if it occurs later in the pattern, in fact all the way to the point of the pattern is good, but not near the start. The best trades occur when a down side break occurs after the stock bounces off the lower boundary and drops back before hitting the upper boundary.
If volume supports an ascending 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.
Short Trading Ascending Triangles Can Be Profitable
Incorporating these simple changes when selecting ascending triangles to trade short, dramatically improves the results. With an average return per trade of 1.07% in 10 days and a hit rate of 52% it is possible for ascending 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. - 23211
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
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