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How to play an ascending triangle?
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How to play an ascending triangle?

  #1 (permalink)
Trading Apprentice
Miami, FL USA
 
Futures Experience: Beginner
Platform: TD
Favorite Futures: ES
 
Posts: 5 since Jan 2012
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How to play an ascending triangle?

I have played ascending triangle for my passed 2 trades and lost money. This is how Iíve done it:

1) I have successfully detected the pattern on one minute chart and drew trend lines to confirm it.
2) Watched for more consolidation and extended my tend lines and waited for the break out of the resistance (text book Play).
3) Once the price broke out of the resistance, I tried to get a fill as soon as I can, but by the time that I got filled the price was more than a point higher than where the resistance was.
4) From there, it was a losing battle, with the price falling back to the resistance where my stop was.

Being able to repeat the same mistake today I see a learning opportunity. In both cases it looked as I could have gone short and made money since the price did come down to the resistance line, but I not so clear how to accomplish this. So, what is the right way to play here?

Thanks in advance

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  #2 (permalink)
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  #3 (permalink)
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Fat Tails's Avatar
 
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An ascending triangle is a situation where you have identified an area of resistance and then observe higher lows. Usually pressure builds up for some time, before price breaks out to the upside. Other than detecting the pressure there should be no long upper tails indicatice of strong sellers.

It is best to enter a position when volatility is still low. Low volatility means reduced or no slippage and narrow stops and you are rewarded by a favourable reward to risk ratio. Once the breakout has occured, it is too late to jump on the band-waggon. Professional traders love to hunt breakout traders. There are two possibilities to enter the trade, when volatility is still low

(1) prior to the breakout
(2) after the breakout when price retraces back to prior resistance which now has become support

Both (1) and (2) show low volatility. The win rate may be lower than 50%, but your R-multiple (reward-to-risk) is best at those places. To improve the win rate you can time your entries with a help of an oscillator as shown in the chart below.

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Last edited by Fat Tails; March 23rd, 2012 at 07:10 AM.
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  #4 (permalink)
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rocky5 View Post
I have played ascending triangle for my passed 2 trades and lost money. This is how Iíve done it:

1) I have successfully detected the pattern on one minute chart and drew trend lines to confirm it.
2) Watched for more consolidation and extended my tend lines and waited for the break out of the resistance (text book Play).
3) Once the price broke out of the resistance, I tried to get a fill as soon as I can, but by the time that I got filled the price was more than a point higher than where the resistance was.
4) From there, it was a losing battle, with the price falling back to the resistance where my stop was.

Being able to repeat the same mistake today I see a learning opportunity. In both cases it looked as I could have gone short and made money since the price did come down to the resistance line, but I not so clear how to accomplish this. So, what is the right way to play here?

Thanks in advance

I play them using the height of the triangle as the target price from the top(resistance). if the height is small then the risk is too great. enter after the price closes above resistance. I would use a smaller time frame.

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  #5 (permalink)
Trading Apprentice
Miami, FL USA
 
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Thank you very much for your excellent solution. I have stopped writing on my chuck board ď I will not trade ascending triangleĒ over and over and added your suggestions to my play book.

Thanks Again

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  #6 (permalink)
Elite Member
san francisco
 
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seconding Fat Tails; u gotta get 'em b4 they break out. sense the pulse of the bars. personally i find 5m bars much easier to interpret.

Du sublime au ridicule, il n'ya qu'un pas. ~Napoleon Bonaparte
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  #7 (permalink)
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thessaloniki
 
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You said 1 minute TF. I would use a 5 min TF and see if it is any better. 1 min is just too fast for anything.

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