| I have spent a lot of my trading career studying | | | | in around 10 days. Strangely our testing has found |
| chart patterns. Early on in my trading career I found | | | | that an ascending wedge, which is widely regarded as |
| that it was possible to trade ascending triangles as | | | | a short pattern, actually performs very well trading |
| they broke out to the upside. This was a very | | | | long. |
| profitable pattern back in the technology boom with | | | | Most Profitable Short Chart Patterns |
| moves of 50% in a week or even 30% in a day | | | | Contracts for Difference (CFDs) allow me to trade |
| quite possible when these patterns broke out. | | | | patterns both long and short. Trading short the most |
| The Truth About Chart Patterns | | | | profitable chart patterns are more limited with the |
| More recently I have completed a much more in | | | | descending triangle and broadening ascending pattern |
| depth study of patterns with a friend who has been | | | | being the stand out performers. The success rate of |
| able to model chart patterns using a complex | | | | these patterns is lower with about 45% of the |
| computer algorithm. For the first time we are now | | | | patterns profitable and an average return per trade |
| able to identify profitable chart patterns and verify | | | | of 1% in around 9 days. Market conditions must be |
| their effectiveness. | | | | supportive for other patterns to perform well on the |
| Most Profitable Long Chart Patterns | | | | short side. If the market and sector are falling then |
| From an analysis of around 60,000 trades on the | | | | the symmetrical triangle, ascending triangle and |
| Australian Stock Exchange we have found the | | | | rectangle can also be traded short very successfully |
| following results. On the long side the most profitable | | | | with similar results that the other profitable chart |
| patterns to trade are much as you would expect. | | | | patterns deliver in all market conditions. Descending |
| Ascending triangles, symmetrical triangles and | | | | triangles and broadening ascending patterns typically |
| rectangles can all be traded quite profitably as they | | | | produce even better results in falling markets. |
| break to the upside. Less well known are the | | | | But Wait There Is More |
| broadening descending patterns and broadening | | | | While this is a concise summary of the most |
| ascending patterns which are also profitable patterns | | | | profitable patterns that you can trade, I have found |
| trading long. The success rate for these patterns sits | | | | that adding other filters when selecting patterns can |
| just above the 50% mark, using a tight stop loss and | | | | dramatically improve the profitability. |
| they return an average of more than 1% per trade | | | | |