Rectangles - Long Trading Strategy with CFDs
Rectangles have been very popular with traders over the years trading the chart pattern when it breaks out in either direction. A rectangle is defined by two lines, one on the upper boundary of the price movement and one on the lower boundary, both of which are horizontal. The lines are parallel. These can be referred to as consolidations or channels, or the well known Darvas Box, used by Nicolas Darvas to make $2 million in the markets.
Rectangles, A Traders Favourite Pattern?
Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.
Improve Your Trades
When you look at the performance of a rectangle the pattern works better when the market is rising. Trading rectangles when the market is in an up trend or consolidating improves your trading results. If the sector and the stock are consolidating or rising this also improves the performance of the pattern.
Rectangles are not dependent on where in the pattern the breakout occurs. The length of a rectangle is important with patterns that are longer than 10 days and less then 35 days producing better results.
Volume is important with rectangles ensure that the volume is supportive of the breakout with the volume as the share rises more than volume as the share falls. Avoid patterns that have lower highs prior to the breakout or the last turning point is formed by a single outside candle.
Rectangles Deliver Strong Profits
Following a series of simple rules to determine which rectangle to trade can improve results dramatically. By applying these filters rectangles are profitable on a stunning 71% of the trades and return an average of 1.89% per trade in 13 days. This is a very predictable pattern to trade.
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. - 23305
Rectangles, A Traders Favourite Pattern?
Rectangle breakouts show a slight bias to the upside with patterns breaking up 54% of the time. This upward bias is likely due to the overall bullish bias of the market as the symmetrical nature of the pattern does not clearly indicate a breakout direction. The breakout of rectangles can deliver strong returns with 56% of the patterns being profitable. The average return for the long trades is 1.15% in 12 days.
Improve Your Trades
When you look at the performance of a rectangle the pattern works better when the market is rising. Trading rectangles when the market is in an up trend or consolidating improves your trading results. If the sector and the stock are consolidating or rising this also improves the performance of the pattern.
Rectangles are not dependent on where in the pattern the breakout occurs. The length of a rectangle is important with patterns that are longer than 10 days and less then 35 days producing better results.
Volume is important with rectangles ensure that the volume is supportive of the breakout with the volume as the share rises more than volume as the share falls. Avoid patterns that have lower highs prior to the breakout or the last turning point is formed by a single outside candle.
Rectangles Deliver Strong Profits
Following a series of simple rules to determine which rectangle to trade can improve results dramatically. By applying these filters rectangles are profitable on a stunning 71% of the trades and return an average of 1.89% per trade in 13 days. This is a very predictable pattern to trade.
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. - 23305
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by Mr. Forex at
3:03 AM
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