![]() ![]() ![]() Nevertheless, we recommend being cautious due to the lack of 100% quantified trading rules. Let’s switch to the symmetrical triangle top: DescriptionĪlthough we were not able to make a strict backtest with trading rules, we took good use of the research by Thomas Bulkowski. We start by looking at the symmetrical triangle bottom: DescriptionĪverage rise/decline of successful formations Bulkowski decided to divide this group into two parts: the triangle symmetrical bottom and the symmetrical triangle top. Let’s go on to look at the last statistic – the symmetrical triangle. Symmetrical triangle breakout strategy backtest Let’s switch to the statistics for the descending triangle: Description #Formations that reached the price targetĭescending triangle breakout strategy backtest #Formations among 500 stocks from 1991 to 1996 We summarize Bulkowski’s findings in this table: Description Ascending triangle breakout strategy backtest In total, he registered over 15 000 technical formations, of which he divided rectangles into two groups: Rectangle bottoms and rectangle tops. This gave a total database of 2 500 years, although of course there are sources of error as all the stocks are from the same time period. Nevertheless, we believe his findings are a decent approximation of the usefulness of the triangles.īulkowski, an engineer, sat down and went through technical formations for 500 stocks over a period of five years. His book is not based on strict quantified rules or data driven backtests, but rather on visual confirmation. ![]() Instead of a quantified backtest with defined trading rules, we rely on data from Thomas Bulkowski’s book from the late 90s called The Encyclopedia of Chart Patterns. It’s possible, of course, but we believe some already published stuff is good enough. It’s pretty demanding to make a breakout triangle trading strategy with strict trading rules and settings because of all the rules required. In this type, the price swing highs are at the same level, giving it a horizontal upper boundary (resistance level), while the swing lows are rising, giving it an ascending lower boundary (support level).Īn example of an ascending triangle is listed below:īreakout triangle trading strategy (backtest and example) There are three types of the triangle pattern: Ascending triangle What are symmetrical, ascending, and descending triangles? Some traders consider it a sign of smart money manipulating the market to bring in more market orders to fill their positions. A false triangle breakout occurs when the price breaks out of the pattern and the subsequent price bars move back into the triangle, faking out traders who traded the breakout. There is always the risk of false breakouts when trading the triangle pattern. So, to get your target when trading a triangle breakout, measure the base of the triangle and then project it from the breakout level. The target of a triangle breakout should be the same size as the base of the triangle. What should be the target of a triangle breakout? With this strategy, the trader tries to go long when there is an upside breakout of a triangle pattern in an uptrend, or go short when there is a downside breakout of a triangle pattern in a downtrend. The triangle breakout strategy is a trading technique that aims to trade the continuation of the prevailing trend following a price breakout from a triangle consolidation pattern. The upper boundary of the triangle represents the supply line (resistance level), while the lower boundary represents the support level or the demand line.īeing a continuation pattern, the price is more likely to break out in the direction of the trend preceding the formation of the triangle pattern, although it can occur in either direction. The triangle represents a temporary pause in the market, both from the buy-side and the sell-side - the supply line diminishes to meet the demand. The triangle is widest at the beginning of its formation, but as the market continues to trade in a sideways pattern, the trading range keeps narrowing until the price breaks out of either the upper or lower boundary. Attaching a trendline across the swing highs and swing lows gives the shape of a triangle. It represents a consolidation in the price trend and is formed by narrowing price swings. Breakout Triangle Strategy – conclusionĪ triangle is a continuation chart pattern that has the shape of a triangle.Symmetrical triangle breakout strategy backtest.Descending triangle breakout strategy backtest.Ascending triangle breakout strategy backtest.Breakout triangle trading strategy (backtest and example).What are symmetrical, ascending, and descending triangles?.What should be the target of a triangle breakout?. ![]()
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