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| CFD Trading Strategy - Rising Channel Upside Breakout |
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| Written by Jeff Cartridge |
| Saturday, 07 November 2009 10:19 |
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The rising channel is a 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. A rising channel is formed when the price action is contained within two lines. Both the bottom line and the top line slope up, with both lines near to parallel. Rising Channel, Ok To Trade Rising channels are normally patterns that would be considered to trade on the short side, but also can perform on the upside. 51% of the patterns break upwards and can deliver good returns when they do. The average gain is 0.53% in 8 days with under half of the breakouts (40%) being profitable. There are better patterns to trade on the long side, but selecting the right conditions can make trading a rising channel attractive. Refine Your Entries A long breakout from a rising channel works better in bullish market conditions. A rising or consolidating market is beneficial and the sector environment should not be in consolidation, but rising or falling. The stock should also be falling or consolidating. Essentially you are best trading the rising channel long when the stock has a pull back in a bullish market environment. Avoid trading rising channel patterns that are very tall where the height of the pattern is more than 10% of the stock price. Patterns that take longer than 40 days to form also perform poorly. Better results are also achieved if the pattern does not form around one large candle, from top to bottom of the pattern. Rising channel with two highs, lows or closes at the same price should be avoided, as this usually occurs in an illiquid stock. 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 Rising Channel Can Be Profitable You can improve your trading results by using a series of filters that have been outlined here. This select group of rising channel delivers an average profit of 2.11% in 10 days and is profitable on 63% of the trades. Overall this makes rising channel attractive to trade, but these filters do significantly reduce the number of trading opportunities. 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. About the Author: Jeff Cartridge has been trading CFDs since 2002 and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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