As of 09/19/2019
  Indus: 27,095 -52.29 -0.2%  
  Trans: 10,504 -72.12 -0.7%  
  Utils: 860 +3.49 +0.4%  
  Nasdaq: 8,183 +5.49 +0.1%  
  S&P 500: 3,007 +0.06 +0.0%  
YTD
 +16.1%  
 +14.5%  
 +20.6%  
 +23.3%  
 +19.9%  
  Targets    Overview: 09/12/2019  
  Down arrow26,400 or 27,600 by 10/01/2019
  Down arrow10,200 or 11,100 by 10/01/2019
  Up arrow875 or 830 by 10/01/2019
  Down arrow8,000 or 8,750 by 10/01/2019
  Down arrow2,925 or 3,050 by 10/01/2019
As of 09/19/2019
  Indus: 27,095 -52.29 -0.2%  
  Trans: 10,504 -72.12 -0.7%  
  Utils: 860 +3.49 +0.4%  
  Nasdaq: 8,183 +5.49 +0.1%  
  S&P 500: 3,007 +0.06 +0.0%  
YTD
 +16.1%  
 +14.5%  
 +20.6%  
 +23.3%  
 +19.9%  
  Targets    Overview: 09/12/2019  
  Down arrow26,400 or 27,600 by 10/01/2019
  Down arrow10,200 or 11,100 by 10/01/2019
  Up arrow875 or 830 by 10/01/2019
  Down arrow8,000 or 8,750 by 10/01/2019
  Down arrow2,925 or 3,050 by 10/01/2019

Bulkowski's Ascending Triangle Setup

 

My book, Encyclopedia of Chart PatternsEncyclopedia of Chart Patterns 2nd Edition book., discusses all three triangles plus 60 other chart and event patterns.

If you click on the above link and then buy the book (or anything) while at Amazon.com, the referral will help support this site. Thanks.

-- Tom Bulkowski

$ $ $

This article discusses trading the ascending triangle chart pattern. Due to the shortcomings of the chart pattern, this is not the best trading setup. Most of the tests have large drawdowns with low profits, but there are some gold nuggets among the tests.

Ascending Triangle Setup Summary

Below you will find almost two dozen trading setups for the ascending triangle chart pattern. Pick the one you like and test it. Change it as necessary to get it to work for you. However, you may find that other chart patterns work better.

The best performing setup enters the trade when price rises a penny above the top of the chart pattern, and exits at the close three days later. It sports a 2% profit during an average hold time of 5 days, wins 65% of the time, has a win/loss ratio of over 3, with a maximum drawdown of 16%.

Ascending Triangle Setup Background

Shown is an ascending triangle chart pattern

If you don't know what an ascending triangle looks like or how to identify it, then click here. I show an ideal version of the pattern in the picture to the right.

The theory behind ascending triangles is that they point the way to higher prices after an upward breakout. Testing shows they do breakout upward 64% of the time (as of 7/1/16). Unfortunately, experience has taught me to look elsewhere for a chart pattern to trade because ascending triangles often don't perform up to expectations. I found that price rises for a few days, perhaps 5% to 10% or so and then collapses. In other words, it's rare that you can make money on these patterns for a position trade and you have to be nimble for swing trading.

Nevertheless, the ascending triangle chart pattern makes for an excellent trading platform to test various setups. Why? Because it has a flat top, so the breakout price is easy to figure out (it's a penny above the top trendline as opposed to a symmetrical triangle, which has a sloping top trendline). The ascending triangle chart pattern is also common, popular, and easy to spot in historical prices.

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Ascending Triangle Setup Methodology

Throwback

I split my database into two pieces, in-sample and out-of-sample, each containing about half the number of ascending triangles. I did not divide them into two time periods. Then I tested the in-sample group using various methods to find what worked best. Most of the ideas centered around throwbacks -- quick moves up before price rounds over and drops.

After completing the in-sample tests, I ranked the results of each metric (such as profit per trade, win/loss ratio, drawdown, and so on), and summed the ranks. The test with the lowest score was the best performing.

Then I performed the same tests on out-of-sample data and ranked the results. I discovered that the best performing in-sample test dropped to near the bottom of the out-of-sample tests and the worst performing in-sample test became the best performing out-of-sample test. In other words, the results flipped between in- and out-of-sample.

This, of course, freaked me out. For the final word on the results, I switched to two other databases that extend back to 1991 (the smaller database also went back that far). Using them allowed me to boost the number of samples from 230 to over 1,000, with no duplicates. I threw out the earlier results and just used the out-of-sample results from the two databases. Those results follow.

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Ascending Triangle Setup Results

The various results from the tests are listed below and an explanation of each test is in the next section. Here are the definitions for each column.

The Rank column is a rank of the sum of the ranks of many but not all of the columns. The sum with the lowest total is the best. The best performing test is listed first.

The Per Trade Avg P/L columns are the average profit or loss per trade in dollars and percent. Both are based on an investment of $10,000 per trade minus $10 for commissions each trade ($20 round trip). No allowance for slippage or other fees were included, and no allowance for cash factored into the tests.

% Wins is the percentage of winning trades. Avg Win is the average of all winning trades. Avg Loss is the average of all losing trades. W/L Ratio is the average win divided by the average loss. If losses are larger than the average win, then the value will be negative.

Max Drawdown is the largest equity drop from peak to valley during the trade. It represents how much profit you give back (worst case). Hold Time Loss is the maximum drop below the buy price during the trade. It represents how much money you could have lost if you sold when price bottomed. Hold Time is the average time the stock was held. # Trades is the number of trades counted in the test.

Items shown in red are ranked best in that column.

Rank 
Test
Per Trade
Avg P/L
Per Trade
Avg P/L
%
Wins
Avg
Win
Avg
Loss
W/L
Ratio
Max
Drawdown
Hold
Time Loss
Hold
Time
#
Trades
13 day exit $202.31 2.0%65% $295.92  $93.61 3.1616%18%51030
2Buy price >200-day SMA, 3 day exit $189.27 1.9%67% $276.66  $87.39 3.1711%18%5698
3Buy price >21-day SMA, 3 day exit $201.72 2.0%65% $295.74  $94.03 3.1516%18%51025
4Buy price <200-day SMA, 3 day exit $225.14 2.3%62% $335.78  $110.64 3.0316%14%5280
5Buy price >50-day SMA, 3 day exit $193.03 1.9%65% $289.91  $96.88 2.9916%18%5935
62 day exit $174.36 1.7%64% $257.14  $82.78 3.119%18%41031
73 day exit. Stop: lower of today or yesterday -.01 $186.36 1.9%64% $294.16  $107.81 2.7316%13%51034
84 day exit $218.37 2.2%65% $326.65  $108.27 3.0219%18%71034
92 day exit, stop is buy day's low-.01 $113.16 1.1%60% $249.16  $136.00 1.839%10%41034
105 day exit $220.13 2.2%64% $336.81  $116.68 2.8927%18%81033
10a3 day or 5% exit, no stop $158.96 1.6%66% $255.18  $96.22 2.6516%23%51264
113 day exit, stop at low on buy date-.01 $138.95 1.4%59% $281.00  $142.05 1.9816%11%51034
Rank 
Test
Per Trade
Avg P/L
Per Trade
Avg P/L
%
Wins
Avg
Win
Avg
Loss
W/L
Ratio
Max
Drawdown
Hold
Time Loss
Hold
Time
#
Trades
125% profit, stop at halfway between buy price and fmtn low $129.35 1.3%67% $352.52  $223.17 1.5821%18%121033
139% profit exit, stop: fmtn-.01 $249.86 2.5%69% $621.83  $371.97 1.6744%34%381030
1410% profit exit, stop: fmtn-.01 $264.15 2.6%67% $671.22  $407.07 1.6544%34%441030
157% profit exit, stop: fmtn-.01 $197.89 2.0%73% $515.48  $317.59 1.6244%34%301032
166% profit exit, stop: fmtn-.01 $176.73 1.8%76% $463.57  $286.84 1.6244%31%261032
175% profit exit, stop: fmtn-.01 $151.72 1.5%79% $406.50  $254.78 1.6044%31%211032
188% profit exit, stop: fmtn-.01 $209.19 2.1%70% $565.57  $356.37 1.5944%34%341031
195% profit, stop at buy day's low -.01 $56.50 0.6%52% $276.13  $219.63 1.2614%11%71034
20Exit day after a lower close $(88.99) -0.9%60% $255.46  $344.45 -0.7419%10%41034
21Exit day after a lower high $(88.52)-0.9%59% $261.83  $350.34 -0.7526%10%51033
2210% profit, stop at buy day's low -.01 $56.11 0.6%36% $358.40  $302.29 1.1935%14%151034
23Exit day after a lower low $(94.18) -0.9%57% $264.70  $358.87 -0.7426%10%61030
Rank 
Test
Per Trade
Avg P/L
Per Trade
Avg P/L
%
Wins
Avg
Win
Avg
Loss
W/L
Ratio
Max
Drawdown
Hold
Time Loss
Hold
Time
#
Trades

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Ascending Triangle Setup Test Explanation

Unless otherwise specified, trade entry uses a buy stop a penny above the top of the formation (a penny above the highest high in the chart pattern). For the exit, sell at the close (as in the case of "3 day exit," for example) or the opening price the day after the exit signal. "Buy price >200-day SMA, 3 day exit," for example, means to set a buy stop a penny above the top of the ascending triangle only if that price is above the 200-day simple moving average (SMA) on the buy day. Once into the trade (day 1), sell at the close of day 4.

-- Thomas Bulkowski

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See Also

 

Support this site! Clicking any of the books (below) takes you to Amazon.com. If you buy ANYTHING while there, they pay for the referral.

My novels:      New                  Bumper's Story Head's Law

Chart Patterns: After the Buy Getting Started in Chart Patterns, Second Edition Trading Basics Fundamental Analysis and Position Trading Swing and Day Trading Visual Guide to Chart Patterns Encyclopedia of Candlestick Charts Encyclopedia of Chart Patterns 2nd Edition Trading Classic Chart Patterns

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