Ascending Triangles -Short Trading Strategy

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 Profitable 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.

Improve Your Trades

Short breakouts from ascending triangles work better in falling markets which is clear from the results that were achieved in 2000, 2002 and 2008. The best short trades occur at market turning points. The market and the stock should be in an up trend or consolidating, with the sector consolidating or falling for the best results when trading ascending triangles short.

Avoid ascending triangle trades that break down at the start of the pattern, but it is ok to let the trade go all the way to the point of the ascending triangle before breaking out. Another key to picking successful short breakouts from ascending triangles is to look for a turning point up from the lower boundary that fails to reach the upper boundary and then falls away.

If the volume supports the breakout the results are better. Supportive volume means the volume on the way down is higher than the volume on the way up.

Ascending Triangles Can Be Profitable

Following a series of simple rules to determine which ascending triangle to trade can improve results dramatically. By applying these filters ascending triangles are profitable on 52% of the trades and return an average of 1.07% per trade in 10 days. This is a profitable pattern to trade.

Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 – 2008.