Ascending & Descending Channel Patterns
Ascending & descending channel patterns produce an approximate 73% win rate.
The channel pattern usually occurs when the market is trending and acts as a delayed continuation pattern.
An ascending channel pattern is defined by a bullish trend followed by lower highs and lower lows, staying within a channel (2 parallel trend lines).
A descending triangle pattern is defined by a bearish trend followed by higher lows and higher highs, staying within a channel.
Ascending Channel Pattern
The ascending channel pattern is complete when price breaks above the upper trend line, and is considered successful when price moves from the outer edge and produces a distance of the initial move that started the channel.
Descending Channel Pattern
The descending channel pattern is complete when price breaks below the lower trend line, and is considered successful when price moves from the outer edge and produces a distance of the initial move that started the channel.
When you recognize an ascending or descending channel pattern, you can either A enter at market price once the breakout occurs or B set a pending order.
The pending order you would want to set would be just above the upper trend line for an ascending channel pattern or just below the lower trend line for a descending channel pattern.
In the example to the right, you see an ascending channel pattern. The upper trend line is the break out area and the pending order would be set just above for a long position.
Trail Stopping & Risk To Reward
After you have decided whether you will be entering at market price or setting pending orders, you must have a trading plan in place for take profit levels and solid risk management.
In the example to the right you see an ascending channel pattern. The lines represent TP (take profit) levels for multiple positions. They are 1:1, 2:1, 3:1 and a 4th position of 3:1 with trail stop.
In my next lesson, I will be covering Double Top & Double Bottom Patterns. If you missed out on last week’s lesson CLICK HERE to access.
See you then!