Trading Falling Wedges

The idea behind pattern pairs is to pick a chart pattern type (like broadening bottoms with upward breakouts) to buy and another to sell (like double tops). You buy the upward breakout from the broadening bottom, hold for a few years, and sell when a double top appears and breaks out downward. Along the way, you give price a chance to rise far enough to overcome those trades which are stopped out for a loss. This is a trend-following strategy.

Trading Falling Wedges: Summary

The figure illustrates the idea for trading pattern pairs, where price is the red line and the boxes are chart patterns. This articles assumes you buy an upward breakout from either a falling wedge or a busted one (price breaks out downward, drops no more than 10%, reverses, and closes above the top of the wedge). Buy as price rises above the top of the wedge.

On the sale side, you can sell the first bearish chart pattern which comes along or wait for your favorite bearish chart pattern to appear and sell then.

Here's a list of the top five performing sell signals, based on annualized gain (annualized because the hold time is often years, in parenthesis).

The following list shows the expected performance of chart pattern pairs, ranked by their expectancy. Expectancy is a way of gauging winning and losing trades and how much money you might make trading a pattern pair. I put the expected profit per trade, per share, in parenthesis.

Trading Falling Wedges: Entry and Exit Conditions

The databases I built over several decades doesn't identify every chart pattern. There may be plenty of double tops over the years, for example, that I didn't catalog on the way to the one I did catalog. So buying an upward breakout from a falling wedge and selling at the double top I cataloged would be different than choosing to sell a different double top. However, the following analysis does give a real-world flavor for how well you might do trading chart patterns if you follow the pattern pair strategy.

I used the following 43 chart patterns in the analysis, but some only applied if they were busted.

Trading Falling Wedges: Stops

I used a stop loss order set a penny below the bottom of the chart pattern. Price on the way down may have gapped below the stop price (for the sale price), so I used the lower of the stop price or the opening price on the day of sale).

For trailing stops, I removed the stop loss order and used a trailing stop set at 10%, 15%, 20%, or 25% below a peak, never lowering the stop value, but raising it if a higher peak came along during the trade.

In Table 1, I calculated the percentage net gain (the average of gains and losses) when using various trailing stop loss amounts (10%, 15%, 20%, and 25%) for all tested chart patterns according to the busted/non-busted buy/sell configuration. In parenthesis is the size of the average loss so I could detail how losses change with various stop loss orders.

For example, if I tested non-busted falling wedges and sold various non-busted patterns (ascending triangles, broadening tops, head-and-shoulders tops, and so on), I made an average of 45% ("Stop Loss Only" column) after having a stop loss order in place. Losses averaged 7%. Replacing the stop loss with a 10% trailing stop cut the gain to 6% but also trimmed the average loss to 5%. Using a 25% trailing stop allowed me to keep more money, 23%, but losses climbed to 15%. If I didn't use any type of stop, the gain averaged 123% with losses averaging 27%.

The results show that trades which do not use a stop make the most money but losses are huge. In all columns, non-busted patterns outperformed busted ones.

Trading Falling Wedges: Busted Patterns

Table 1: Various Trailing Stop Settings: Net Profit and (Average Loss)
Data	10%	15%	20%	25%	Stop Loss Only	No Stop
Non-busted buys, non-busted sales	6% (-5%)	9% (-8%)	17% (-11%)	23% (-15%)	45% (-7%)	123% (-27%)
Busted buys, non-busted sales	1% (-9%)	2% (-12%)	8% (-14%)	15% (-19%)	25% (-12%)	45% (-33%)
Non-busted buys, busted sales	5% (-5%)	7% (-8%)	13% (-11%)	20% (-14%)	33% (-6%)	98% (-23%)
Busted buys, busted sales	2% (-6%)	4% (-9%)	10% (-10%)	17% (-14%)	21% (-11%)	54% (-27%)

Table 2 shows what I found when comparing the performance of non-busted patterns (both buy and sell) with busted and non-busted chart patterns. In 22 or 31 contests (up to 31 different chart pattern types, depending on which apply), I compared the three combinations of busted and non-busted buy and sell signals to non-busted buy and sell signals. The table below shows the percentage of time the busted combination beat the non-busted combination in the contests.

For example, I found that busted patterns won just 18% of the time or 4 of 22 contests when trading (buying and selling) using busted patterns (compared to non-busted for both).

According to the contest results, avoid trading using busted chart patterns.

Trading Falling Wedges: Non-busted Buy, Non-Busted Sale

Table 2: Busted or Non-Busted Contest Winners
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	N/A (benchmark)	50%
Buy busted pattern	29%	18%

Table 3 shows statistics I collected for falling wedges using the trading rules described above and shown in the figure. A stop loss order was used and priced a penny below the bottom of the chart pattern (after buying).

For example, if you were to buy the upward breakout from a falling wedge chart pattern and hold it until you encountered a broadening bottom (the first chart pattern listed in the table), but one with a downward breakout, you'd net an average of 23% on the 172 (34 winners, 138 losers) trades. That's an average of 208% on your winners, 7% average loss on your losers. You'd find that only 20% of the trades made money but you'd gain an average of 23% per year (ranking 37th where 1 is best). If you removed the stop loss order and just held on until the broadening bottom with a downward breakout appeared, you'd make an average of 107% per trade.

The expectancy averages $1.60 per share per trade which ranks 56th where 1 is the best value.

Notes: The rank is based on the net gain for all four performance tables (tables 3 to 6) shown below. Trades with sample counts below 30 are not ranked.

Table 3: Statistics for Falling Wedges
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	208%	-7%	36%	23%	37	107%	34/138	20%	$1.60	56
Broadening top	248%	-6%	43%	31%	20	113%	54/226	19%	$3.89	19
Broadening formation, right-angled and ascending	214%	-7%	34%	28%	28	84%	28/125	18%	$1.14	61
Broadening formation, right-angled and descending	130%	-7%	20%	18%	52	59%	26/107	20%	$1.05	63
Broadening wedge, ascending	138%	-8%	24%	25%	32	86%	24/86	22%	$1.06	62
Broadening wedge, descending	215%	-7%	43%	25%	33	94%	21/72	23%	$3.45	22
Bump-and-run reversal top	215%	-7%	45%	44%	10	109%	88/291	23%	$2.76	34
Diamond bottom	358%	-7%	57%	45%	9	97%	8/38	17%	$2.86	30
Diamond top	280%	-5%	29%	34%	18	91%	17/123	12%	$3.03	26
Adam & Adam double top	552%	-6%	79%	45%	8	214%	97/539	15%	$6.23	7
Adam & Eve double top	241%	-6%	30%	28%	27	129%	49/282	15%	$2.57	37
Eve & Adam double top	225%	-6%	27%	21%	42	145%	48/288	14%	$2.95	28
Eve & Eve double top	199%	-6%	33%	29%	24	125%	78/328	19%	$2.42	42
Falling wedge	216%	-9%	16%	13%	64	46%	7/55	11%	-$2.34	79
Head-and-shoulders top	289%	-6%	57%	37%	14	134%	260/957	21%	$3.77	20
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders, complex top	205%	-6%	38%	29%	25	84%	49/184	21%	$2.13	46
Rectangle top	120%	-7%	14%	15%	60	65%	32/161	17%	$1.73	53
Rising wedge	162%	-6%	30%	26%	30	105%	77/283	21%	$2.10	47
Rounding top	167%	-8%	19%	17%	57	76%	33/185	15%	$0.48	68
Ascending scallop	282%	-7%	65%	67%	2	101%	22/67	25%	$2.25	44
Descending scallop	429%	-8%	76%	57%	4	128%	116/489	19%	$2.96	27
Scallop, inverted and ascending	478%	-6%	58%	40%	13	146%	5/33	13%	$3.57	21
Scallop, descending and inverted	276%	-7%	47%	41%	12	81%	61/255	19%	$1.78	52
Triangle, ascending	245%	-7%	47%	33%	19	98%	47/174	21%	$2.84	32
Triangle, descending	135%	-7%	22%	19%	50	60%	44/173	20%	$1.45	58
Triangle, symmetrical	162%	-6%	22%	18%	56	86%	105/525	17%	$1.49	57
Triple top	283%	-6%	40%	30%	22	121%	144/755	16%	$2.93	29
Rectangle bottom	353%	-7%	62%	51%	5	93%	30/126	19%	$2.85	31
3 falling peaks	399%	-7%	56%	43%	11	122%	143/779	16%	$2.65	36
Roof	90%	-6%	14%	22%	39	120%	12/46	21%	$1.93	49
Roof, inverted	339%	-7%	55%	36%	15	168%	16/73	18%	$5.35	11
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Falling Wedges: Busted Buy, Non-Busted Sale

The figure shows the setup for this scenario. When price busts the bearish chart pattern (busts a downward breakout from a falling wedge in a bull market), buy. Sell after a downward breakout from the target chart pattern.

Table 4 shows the performance of busted falling wedges for the entry and sales after downward breakouts from various bearish chart patterns. A stop loss order was used and priced a penny below the bottom of the wedge (after buying).

A busted falling wedge has a downward breakout but price drops no more than 10% before reversing and moving above the top of the wedge. Buy when price moves at least a penny above the top of the busted wedge. Sell after price drops at least a penny below the target chart pattern.

For example, buying a falling wedge with a busted downward breakout in a bull market (the entry price is really the higher of a penny above the top of the wedge or the opening price) and selling after the downward breakout from a broadening top shows winners averaging gains of 89%. Losses average 13%, for a net of 3%. Only 32 trades occurred with a win/loss ratio of 16%. This scenario ranks the annualized net gain as 74th among the four tables. If you traded this as a buy-and-hold position, meaning no stops were used, the net gain climbed to 43%. Expectancy was a loss of $0.70 per share, ranking 75th where 1 is best. You'll have a difficult time trading this pair and making a profit.

Table 4: Statistics for Busted Buys, Normal Sales
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	89%	-13%	3%	2%	74	43%	5/27	16%	-$0.70	75
Broadening top	235%	-12%	44%	23%	38	91%	11/37	23%	$4.58	15
Broadening formation, right-angled and ascending	210%	-13%	54%	24%	34	76%	9/21	30%	$2.21	45
Broadening formation, right-angled and descending	84%	-15%	-4%			34%	2/16	11%
Broadening wedge, ascending	150%	-10%	36%			67%	4/10	29%
Broadening wedge, descending	38%	-12%	2%			51%	7/18	28%
Bump-and-run reversal top	87%	-14%	14%	8%	66	47%	14/37	27%	$4.88	14
Diamond bottom	None	-13%	-13%			76%	0/5	0%
Diamond top	119%	-15%	47%			77%	6/7	46%
Adam & Adam double top	244%	-13%	36%	14%	61	86%	22/95	19%	$6.88	5
Adam & Eve double top	103%	-13%	11%	5%	69	72%	11/41	21%	$0.29	69
Eve & Adam double top	80%	-13%	1%	1%	75	42%	9/50	15%	-$1.32	76
Eve & Eve double top	65%	-15%	8%	4%	73	46%	13/33	28%	-$2.00	78
Falling wedge	144%	-16%	35%			52%	6/13	32%
Head-and-shoulders top	233%	-11%	55%	24%	36	95%	55/146	27%	$5.90	9
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders, complex top	19%	-11%	-7%	-6%	81	25%	4/28	13%	-$1.70	77
Rectangle top	23%	-14%	-7%	-4%	79	57%	6/24	20%	-$2.46	80
Rising wedge	282%	-10%	53%	29%	23	106%	12/44	21%	$4.33	17
Rounding top	165%	-13%	7%			14%	3/23	12%
Ascending scallop	None	-14%	-14%			15%	0/6	0%
Descending scallop	146%	-14%	24%	14%	62	46%	27/88	23%	$1.23	60
Scallop, inverted and ascending	94%	-9%	20%			33%	2/5	29%
Scallop, descending and inverted	60%	-13%	5%	5%	70	13%	9/26	26%	$0.62	66
Triangle, ascending	241%	-12%	35%			68%	5/22	19%
Triangle, descending	33%	-12%	-3%			25%	5/18	22%
Triangle, symmetrical	229%	-12%	56%	24%	35	95%	28/72	28%	$6.03	8
Triple top	128%	-12%	15%	8%	67	60%	31/130	19%	$1.24	59
Rectangle bottom	23%	-11%	-9%			5%	1/19	5%
3 falling peaks	99%	-13%	7%	4%	72	41%	37/174	18%	-$0.12	71
Roof	394%	-12%	39%			87%	1/7	13%
Roof, inverted	243%	-15%	88%			148%	6/9	40%
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Falling Wedges: Non-busted Buy, Busted Sale

A bullish chart pattern appears and you buy at the breakout. Continue holding until your selected chart pattern appears. The chart pattern is bullish because it has an upward breakout but then things go wrong. Price reverses. Sell when the stock dips below the bottom of the chart pattern (meaning it busts the upward breakout).

Table 5 shows the performance statistics for this setup (buying a normal falling wedge and selling only after a busted chart pattern appears). A stop loss order was used and priced a penny below the bottom of the chart pattern (after buying).

For example, buying a falling wedge with an upward breakout in a bull market and selling a busted broadening top shows winning trades making an average of 289%. Losing trades lost 6%, giving a net gain of 60%. The annualized gain is 28% in this case, giving the setup a rank of 29th (where 1 is best). If you traded this without a stop, the net gain climbed to 121%. Of the stocks I looked at, I found 58 trades with 22% of them winning. Expectancy was a $1.62 per share, ranking 55th where 1 is best.

Table 5: Statistics for Normal Buy, Busted Sale
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	289%	-6%	60%	28%	29	121%	13/45	22%	$1.62	55
Broadening top	235%	-6%	26%	20%	46	104%	20/133	13%	$2.51	39
Broadening formation, right-angled and ascending	130%	-6%	19%	16%	58	65%	10/44	19%	$1.81	50
Broadening formation, right-angled and descending	36%	-6%	-1%	-2%	78	35%	6/48	11%	-$0.57	73
Broadening wedge, ascending	174%	-7%	58%			139%	12/21	36%
Broadening wedge, descending	141%	-7%	23%	18%	54	75%	9/36	20%	$1.78	51
Bump-and-run reversal bottom	54%	-7%	5%			72%	5/21	19%
Cup with handle	98%	-8%	14%			52%	5/19	21%
Diamond bottom	187%	-6%	34%	28%	26	94%	8/31	21%	$11.68	1
Diamond top	302%	-5%	77%	47%	6	128%	15/41	27%	$5.33	12
Adam & Adam double bottom	276%	-5%	44%	21%	44	155%	35/163	18%	$7.54	3
Adam & Eve double bottom	101%	-6%	5%	5%	71	96%	14/117	11%	$0.60	67
Eve & Adam double bottom	275%	-6%	25%	20%	47	104%	10/80	11%	$0.07	70
Eve & Eve double bottom	283%	-7%	40%	22%	41	115%	16/83	16%	$4.31	18
Falling wedge	128%	-6%	18%	18%	53	65%	11/50	18%	$2.49	40
Head-and-shoulders bottom	207%	-5%	26%	21%	45	73%	37/215	15%	$0.98	64
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders complex bottom	141%	-6%	35%	21%	43	44%	11/29	28%	$6.23	6
Rectangle top	297%	-6%	36%	36%	17	81%	14/88	14%	$3.31	24
Rising wedge	91%	-5%	24%	18%	55	56%	18/41	31%	$2.68	35
Round bottom	120%	-4%	16%			57%	3/15	17%
Rounding top	331%	-8%	51%			73%	5/24	17%
Ascending scallop	266%	-7%	64%	46%	7	113%	18/52	26%	$4.53	16
Descending scallop	145%	-6%	18%	13%	63	86%	6/31	16%	$7.59	2
Scallop, inverted and ascending	210%	-7%	41%	26%	31	102%	25/88	22%	$4.88	13
Scallop, descending and inverted	375%	-5%	73%	66%	3	124%	8/31	21%	$2.49	41
Triangle, ascending	131%	-6%	21%	19%	51	73%	17/70	20%	$0.98	65
Triangle, descending	320%	-6%	34%	30%	21	83%	11/77	13%	$1.70	54
Triangle, symmetrical	221%	-6%	31%	22%	40	95%	39/200	16%	$2.79	33
Triple bottom	240%	-6%	26%	19%	49	101%	39/261	13%	$2.52	38
Rectangle bottom	45%	-6%	-4%	-6%	80	43%	2/47	4%	-$0.30	72
3 rising valleys	353%	-6%	50%	36%	16	128%	28/149	16%	$3.14	25
Roof	258%	-7%	31%			126%	2/12	14%
Roof, inverted	499%	-5%	121%	70%	1	159%	8/24	25%	$5.37	10
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Falling Wedges: Busted Buy, Busted Sale

Table 6 shows the last combination of trading statistics. It shows busted falling wedges as the entry signal and various busted chart patterns as the exit signal. A stop loss order was used and priced a penny below the bottom of the chart pattern (after buying).

For example, buying a busted falling wedge and selling a busted broadening top made 215% from the winners, lost 11% on the losers for a net gain of 15%. Annualized, it was 15%. The net gain placed the performance of this setup at 59, where 1 is best. Removing stops from the trades allowed them to make 100%. Only 38 trades were taken and 21% of them were winners. Expectancy was a gain of $7.13 per share, ranking 4th among the four tables.

Table 6: Statistics for Busted Buys and Sales
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Broadening bottom	32%	-11%	-1%			49%	3/10	23%
Broadening top	215%	-11%	37%	15%	59	100%	8/30	21%	$7.13	4
Broadening formation, right-angled and ascending	122%	-12%	10%			47%	2/10	17%
Broadening formation, right-angled and descending	84%	-14%	1%			30%	2/11	15%
Broadening wedge, ascending	None	-19%	-19%			87%	0/1	0%
Broadening wedge, descending	443%	-12%	53%			75%	1/6	14%
Bump-and-run reversal bottom	None	-9%	-9%			92%	0/6	0%
Cup with handle	28%	-11%	-1%			2%	1/3	25%
Diamond bottom	142%	-9%	12%			27%	1/6	14%
Diamond top	93%	-10%	41%			77%	4/4	50%
Adam & Adam double bottom	44%	-13%	-4%	-2%	77	60%	6/33	15%	-$3.37	81
Adam & Eve double bottom	290%	-11%	77%			105%	7/17	29%
Eve & Adam double bottom	548%	-12%	81%			179%	4/20	17%
Eve & Eve double bottom	790%	-13%	77%			101%	2/16	11%
Falling wedge	65%	-12%	18%			50%	7/11	39%
Head-and-shoulders bottom	88%	-12%	13%	6%	68	49%	16/47	25%	$3.38	23
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank
Head-and-shoulders complex bottom	75%	-14%	1%			14%	1/5	17%
Rectangle top	73%	-10%	14%			37%	4/10	29%
Rising wedge	15%	-15%	-5%			3%	2/4	33%
Round bottom	243%	-5%	119%			124%	1/1	50%
Rounding top	1%	-10%	-6%			8%	1/2	33%
Ascending scallop	14%	-13%	-11%			35%	1/10	9%
Descending scallop	30%	-9%	-4%			16%	1/8	11%
Scallop, inverted and ascending	91%	-12%	-2%			168%	1/10	9%
Scallop, descending and inverted	57%	-13%	-8%			71%	1/13	7%
Triangle, ascending	29%	-14%	-7%			23%	3/14	18%
Triangle, descending	75%	-9%	22%			43%	6/10	38%
Triangle, symmetrical	53%	-12%	0%	0%	76	32%	10/41	20%	-$0.59	74
Triple bottom	169%	-12%	24%	12%	65	70%	15/60	20%	$2.06	48
Rectangle bottom	26%	-12%	-4%			56%	3/12	20%
3 rising valleys	253%	-12%	40%	20%	48	108%	11/45	20%	$2.30	43
Roof	None	-9%	-9%			28%	0/3	0%
Roof, inverted	36%	-12%	12%			50%	2/2	50%
Sell Pattern	Average Win	Average Loss	Net	Annualized Net	Rank	No Stop Net	Win/Loss Samples	Win Loss	Average Expectancy	Expectancy Rank

Trading Falling Wedges: Performance Improvements

Here are a few ideas the data suggested which may improve performance of your pattern pairs trading.

Trend Start: Short, Medium, or Long

Find the trend start for your chart pattern. Often you can just look at a chart and see where the trend begins. If not, or you want to be sure, then the glossary describes how to find it.

Determine the length from the trend start to the pattern's start: short term (less than 3 months), medium term (3 to 6 months) or long term (more than 6 months).

Table 7 shows the results for the four combinations of busted/non-busted trades and the resulting performance.

Buying non-busted patterns with a short-term (up to 3 months) duration from the trend start to the pattern's start results in better performance. Busted patterns do best using a medium-term (3 to 6 months) duration from the trend start.

Moving Averages: 50- and 200-Day SMA

Table 7: Short (S) Medium (M) or Long (L) Trend Start and Performance
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	S63% M19% L25%	S49% M11% L21%
Buy busted pattern	S22% M59% L4%	S21% M45% L2%

I checked two moving averages at buy time, 50- and 200-day simple moving averages (not as a crossover setup). I compared the breakout price to the value of the moving average. Table 8 shows the performance of buying or selling busted or non-busted patterns when the breakout price was above (A) or below (B) the 50-day simple moving average (SMA).

Table 8: Above (A) Below (B) 50-Day Simple Moving Average
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	A77% B24%	A55% B19%
Buy busted pattern	A41% B-10%	A38% B-9%

Table 9 shows the results of using a longer moving average, the 200-day. Traders often use this as a proxy for the long-term trend.

Selling First Bearish Chart Pattern

The prior discussion assumes you buy a falling wedge (busted or non-busted) but sell a chart pattern of your choosing, such as a downward breakout from a head-and-shoulders top (you wait for one to appear). What if you sold the first bearish chart pattern which comes along? How would you do?

Table 9: Above (A) Below (B) 200-Day Simple Moving Average
	Sell Non-Busted Pattern	Sell Busted Pattern
Buy non-busted pattern	A64% B25%	A44% B21%
Buy busted pattern	A29% B13%	A31% B2%

Table 10 shows the results sorted by the type of patterns involved (busted or non-busted). For example, if you buy a non-busted falling wedge and sell the first non-busted chart pattern which comes along, you'd make 17% on average. Annualized, you'd make 58%. This compares to a 34% annualized gain if you sell a designated pattern (like you waited for a double top before selling, which may or may not be the first bearish chart pattern to come along).

In three of four categories (table cells), selling the first chart pattern which appears will work better than selling a designated pattern. The only configuration where selling a designated pattern works better is to buy a non-busted falling wedge and sell the first busted pattern which appears. That makes 8% annually versus 24% when selling a designated pattern (like waiting for a double top to appear).

The bottom half of the table shows expectancy for the four combinations. Selling non-busted patterns almost tie for the highest expectancy ($1.54 or $1.56).

The results suggest that selling the first non-busted pattern which comes along will provide the best profit potential.

Bulkowski on Pattern Pairs: Falling Wedges