Ascending Wedges – Long CFD Trading Strategy
Written by Jeff Cartridge on September 15th, 2009
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, Unexpected Returns
Most ascending wedges would be expected to break down but, in fact 68%, break out to the upside making this pattern tradable on the long side. And what is more 48% of these breakouts are profitable and on average the profit per trade is 0.94% over a period of 9 days. The ascending wedge is not the best chart pattern when it breaks to the upside, but applying some filters makes this pattern attractive to trade.
Refine Your Entries
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 Deliver Good Profits
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.
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
Lear Stock Trading online with a proven video training course like Trillion Dollar Trading Pro.
This entry was posted on Tuesday, September 15th, 2009 at 7:30 am and is filed under Stock Market. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
Tags: Ascending Wedges, CFD Trading Strategy, CFDs, Chart Patterns, Contracts for Difference, Stock Market, Stock Market Strategy, Trading Ascending Wedges, Trading CFDs, Trading Chart Patterns
O comments at "Ascending Wedges – Long CFD Trading Strategy"
Comment Now!