Symmetrical Triangles -Short CFD Trading Strategy
The symmetrical triangle is sometimes referred to as a wedge. It is a very well known and easily recognized chart pattern that has been used by many successful traders over the years. A symmetrical triangle is formed when the price action is contained within two lines. The top line slopes down while the bottom line slopes up towards the top line. The angle of the two lines is similar giving rise to the name symmetrical.
Symmetrical Triangles, Not Usually Traded Short
Symmetrical triangles provide no clear breakout direction, but 45% break out to the downside making it possible to trade on the short side. Just 44% of these breakouts are profitable and on average the profit per trade is only 0.33% over a period of 9 days. The symmetrical triangle is not one of the best chart patterns when it breaks to the downside, but applying some filters can make this pattern more attractive to trade.
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When you look at the performance of a symmetrical triangle in bearish market conditions you will see the results were stronger than they were in more bullish years. The market, sector and stock should be in a down trend or consolidating to make the best profits.
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Symmetrical triangles that breakout early in the pattern, which is not many, produce inferior results to those that breakout later. The best results are achieved when the stock climbs up from the lower boundary and collapses back before reaching the upper boundary of the pattern.
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. Better breakouts occur when the stock closes lower than the previous day.
Short Trading Symmetrical Triangles Can Be Profitable
Incorporating these simple changes when selecting symmetrical triangles to trade short, dramatically improves the results. With an average return per trade of 1.58% in 9 days and a hit rate of 47% it is possible for symmetrical triangles to be traded short successfully.
Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 – 2008.
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