Conventional text tells us that for long positions it is the ascending triangle breakout to look out for. From a trading perspective, I believe descending triangles in a flat or rising market offer a far better risk to reward opportunity providing that overhead stuck volume isn't excessive. Stop losses can be placed tight to below the horizontal of ascending triangle with an entry just above (maximizing risk to reward), and the turnaround in sentiment on a breakout of the diagonal can lead to previous sellers re-entering positions with vigour. Any thoughts?
They do. But it doesn't follow, from that, that they're necessarily more profitable to trade. R:R ratios are only one variable in the equation that determines profitability: win-rates matter, too. Descending triangles in a flat or rising market offer a better R:R ratio and a lower win-rate. Whether that's good or bad, within the context of our own trade management, is something we each have to analyze for ourself according to the parameters of our methods.
You'll learn that when it comes to talking about chart patterns in certain market conditions...its best to give real chart examples (not generic charts) and then just ignore the people that say its hindsight. That's something I notice. People that talks about TA without real chart examples...they are rarely accused of hindsight chart analysis. Its ironic. In contrast, to avoid confusing the readers, you should post real chart examples and then just ignore those that say its hindsight chart analysis. You should also mention if you've actually traded the patterns or if you're just trying to educate readers about the pattern. Also, you quoted "conventional text" as if you're implying the information you got is from a book or someone's message post at a forum. You should quote the source. Without the above, your post is no different (no meat) from 100s of others that have done exactly the same. I'm basically saying your post about these chart patterns has no meat as in no substance. Good luck. P.S. The typical website explains it differently than you. For example, you said descending triangle in a flat/rising market. In contrast, some websites say descending triangle in a declining market. That's my example of how explaining something without charts can be confusing due to the difference in definitions...different interpretations. http://www.investopedia.com/terms/d/descendingtriangle.asp?layout=infini&v=5C&adtest=5C http://stockcharts.com/school/doku....art_patterns:descending_triangle_continuation
Peter Eliades was one of the more well know experts of using chart patterns http://www.cxoadvisory.com/15412/individual-gurus/peter-eliades-cycling-the-markets/ One time on FNN in 1989( in the aftermath of the 1987 crash when Prechter and many others were trying to predict stock market demise ), he showed a chart of the Dow and was dead certain that a major price breakout on the down side would occur from "rising wedge" formed during 10/19/1987 - 4/10/1989. Of course the market "broke to the upside" and proceeded to rise over the next 10 years ..
To just say a breakout from descending will or won't work, need more information, like timeframe, how long as in time and points that has already gone by. If the "mean" average Swing of a market is fifteen points intraday, and currently descending triangle forms at thirteen points, it is not to say that "mean" swing will contain price but very possible and reward to risk is much smaller than possible profit earlier in trend. One point that is not covered much is how to draw descending triangle as well, where to start, some believe the first point can start anywhere and others are more rule orientated that first point is to the right of highest high and low is made first and then alternating to high then low that high so this shows that market has lower highs. Descending triangle take much longer time to form and very few of them show up day trading futures as markets going down, simple tend to not hang around an area long enough in downtrend and my experiences are short lived. Whereas patterns of Daily or Weekly happen more often in stocks and good free service that spots them is http://finviz.com/ and a paid inexpensive charting scanner service is called Ramp http://www.nebadawn.com/index.html#Patterns