Ascending Wedges - Long CFD Trading Strategy
Ascending wedges have been very popular with traders on the short side, but not so often traded when it breaks in the upward direction. 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, Surprise On The Upside
Ascending wedges are normally patterns that are considered to trade short, but also can perform on the upside. A stunning 68% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.94% in 9 days with half of the breakouts (48%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading ascending wedges attractive.
Specific Setups to Improve Profitability
When you look at the performance of an ascending wedge in bearish market conditions you will see the results were not as strong as they were in more bullish years. Trading ascending wedges when the market is in an up trend or consolidating improves your trading results. The sector and the stock are ideally in a down trend or a consolidation. So in effect you are entering a retracement in the stock and sector during a bullish market phase.
Avoid trading ascending wedge patterns that breakout late, in the last 20% of the pattern. Likewise avoid very shallow patterns where the height of the pattern is less than 6% of the stock price. Patterns that take longer than 44 days to form also perform poorly.
Avoid ascending wedges where there are two consecutive closes at the same level prior to the breakout. These are often signs of an illiquid stock. The pattern works better if the low is less than or equal to the previous day prior to the breakout. Ensure that the volume is supportive of the breakout, i.e. volume as the stock rises is greater than volume as the stock falls.
Ascending Wedges Can Be Profitable
By following some very specific rules, and these rules do matter, profitability of trading ascending wedges can be improved substantially. With an average return per trade almost doubling to 1.89% in 8 days and a hit rate of 52% ascending wedges can be traded very successfully when the conditions are right.
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 Wedges, Surprise On The Upside
Ascending wedges are normally patterns that are considered to trade short, but also can perform on the upside. A stunning 68% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.94% in 9 days with half of the breakouts (48%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading ascending wedges attractive.
Specific Setups to Improve Profitability
When you look at the performance of an ascending wedge in bearish market conditions you will see the results were not as strong as they were in more bullish years. Trading ascending wedges when the market is in an up trend or consolidating improves your trading results. The sector and the stock are ideally in a down trend or a consolidation. So in effect you are entering a retracement in the stock and sector during a bullish market phase.
Avoid trading ascending wedge patterns that breakout late, in the last 20% of the pattern. Likewise avoid very shallow patterns where the height of the pattern is less than 6% of the stock price. Patterns that take longer than 44 days to form also perform poorly.
Avoid ascending wedges where there are two consecutive closes at the same level prior to the breakout. These are often signs of an illiquid stock. The pattern works better if the low is less than or equal to the previous day prior to the breakout. Ensure that the volume is supportive of the breakout, i.e. volume as the stock rises is greater than volume as the stock falls.
Ascending Wedges Can Be Profitable
By following some very specific rules, and these rules do matter, profitability of trading ascending wedges can be improved substantially. With an average return per trade almost doubling to 1.89% in 8 days and a hit rate of 52% ascending wedges can be traded very successfully when the conditions are right.
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 has been trading CFDs since 2002 and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 12:37 AM
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