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
Most ascending wedges would be expected to break down but in reality just 32%, break out to the downside making this pattern better when traded on the long side. 42% of these breakouts are profitable and on average the profit per trade is a meager 0.02% over a period of 8 days. The ascending wedge is certainly not one of the best chart patterns when it breaks to the downside, but applying some filters makes this pattern more attractive to trade.
Improve Your Trades
A break to the downside works better in a rising market, with the sector falling. By using filters that require the market and stock to be in a consolidation or an up trend you can improve the results. The sector should also be in a consolidation or a down trend for the best results.
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 volume supports an ascending wedge 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. If the closing price is the same as the previous day prior to the breakout it is best to avoid these patterns as the stock may be illiquid. If the lows are getting lower and the highs are also falling then you will be more profitable.
Ascending Wedges Profitable Sometimes
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. - 23226
Ascending Wedges, Marginally Profitable
Most ascending wedges would be expected to break down but in reality just 32%, break out to the downside making this pattern better when traded on the long side. 42% of these breakouts are profitable and on average the profit per trade is a meager 0.02% over a period of 8 days. The ascending wedge is certainly not one of the best chart patterns when it breaks to the downside, but applying some filters makes this pattern more attractive to trade.
Improve Your Trades
A break to the downside works better in a rising market, with the sector falling. By using filters that require the market and stock to be in a consolidation or an up trend you can improve the results. The sector should also be in a consolidation or a down trend for the best results.
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 volume supports an ascending wedge 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. If the closing price is the same as the previous day prior to the breakout it is best to avoid these patterns as the stock may be illiquid. If the lows are getting lower and the highs are also falling then you will be more profitable.
Ascending Wedges Profitable Sometimes
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. - 23226
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 10:34 AM
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