CFD Trading Strategy - Ascending Wedges Upside Breakout
The ascending wedge is a very well known chart pattern that you would expect to trade on the short side, but can also be traded if it breaks out to the upside. An ascending wedge is formed when the price action is contained within two lines. Both the bottom line and the top line slope up, but the bottom line has a steeper slope meeting the top line.
Ascending Wedges, Ok To Trade
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
A break to the upside works better in strange market conditions. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The stock and the sector should be in a down trend or a consolidation for the best results. Profitable entries tend to occur when there is a pull back in the share and sector in a market up trend.
A breakout from an ascending wedge ideally occurs before the pattern gets 80% of the way to the point of the pattern. Avoid patterns that breakout late. In a similar way patterns with a very low height relative to the share price (6% or less) produces smaller returns along with very long patterns (44 days or more).
Ascending wedges with two closes at the same price should be avoided, as this usually occurs in an illiquid stock. Look for the low before the breakout to be below the previous day's low and the results also improve. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.
Trading 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. - 23226
Ascending Wedges, Ok To Trade
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
A break to the upside works better in strange market conditions. By using filters that require the market to be in a consolidation or an up trend you can improve the results. The stock and the sector should be in a down trend or a consolidation for the best results. Profitable entries tend to occur when there is a pull back in the share and sector in a market up trend.
A breakout from an ascending wedge ideally occurs before the pattern gets 80% of the way to the point of the pattern. Avoid patterns that breakout late. In a similar way patterns with a very low height relative to the share price (6% or less) produces smaller returns along with very long patterns (44 days or more).
Ascending wedges with two closes at the same price should be avoided, as this usually occurs in an illiquid stock. Look for the low before the breakout to be below the previous day's low and the results also improve. If the volume supports the breakout the results are better. Supportive volume means the volume on the way up is higher than the volume on the way down.
Trading 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. - 23226
About the Author:
Jeff Cartridge has been trading chart patterns since 1998 and created the website LearnCFDs.com Discover Patterns of Success
posted by X - Men @ 12:38 AM
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