Historical Simulator Plug-in
In this example, I want to take you through the Triangle and Pennants tool. We're going to identify some symmetrical, non-symmetrical. Some ascending, descending, inclining, declining, some pendants, some Bulls 'n Bears flags. Don't get scared off by all the names. They're basically the same thing, it's a triangle that's just shaped a little bit differently. We trade them all, basically the same as well.
The first thing we want to, do is we want to point out this 5-Year T-Note Contract, and there's a nice big triangle right here. I don't know if you saw that, when we first turned the chart on, but eventually you'll start looking at these charts and you'll start these things will just start popping right off the screen at you. You won't be able to look at them without all of these formations just jumping out off the screen at you.
But there's a nice, this one we would probably call this an inclining triangle, or an inclining wedge. So, there's an inclining wedge in the 5 year T-Note. Of course, the way we trade these, is we trade a break out at the top and the bottom of this point. Now, notice how we have a false breakout, right here. Those are how you have to be careful with these, with these-- let's play around with these colors, a little bit.
You have to careful because those little areas, right there are what get you caught going the wrong direction. Just like any good you know, running back on a football team, he fakes one way, and goes the other. The market does the same thing. Often times you have to be careful, because a market will fake one direction and go the other. That's exactly what has happened here, in this 5 Year T-Note inclining wedge.
So, here's a perfect triangle formation, right here in Corn. Did you see that, when I flipped to it? It jumped right off the screen, didn't it? You couldn't help looking at that chart without seeing that beautiful, perfectly formed triangle, right there. Of course, you buy on a break above and sell on a break below. This of course, we would've sold and caught the market all the way down, for roughly a, there's a $1,000.00 move right there out of that triangle. That's almost a perfect triangle. Maybe even a pennant.
Pennants and triangles are exactly the same, other than that fact that pennants are maybe just a little bit shorter. This is probably a little bit elongated, it's probably more of a triangle than a pennant.
Let's look back in history and see if we can see anything back here. Real quick jump right off the screen at us, I don't see anything quickly off of that chart.
Let's go to Oats. Now, oats is loaded with little triangles and pennants, and flags. Let's look at this one. Here's a nice, a nice that would probably be considered an ascending, an ascending triangle. Excuse me, a descending triangle. We have another little probably a little pennant, right, not a little pennant, yeah, maybe a little pennant. Little triangle right there. What do you think of that one? Couple little triangles in there.
Let's go onto a different Oats contract. There's our little...wedge right there. Here's another one, see this one right here? Did you see that one before I did? See any more? What about this one? Did you see that one before I did? Anything else? Can you see another one? Do you see that little what we call a little, this one would be considered a Bull Pennant, right here. A little bull flag. The reason we call it a little bull flag, is because it's on a Bullish pattern, it's on it's way up. It's got a nice big, long flagstaff, right here at the front; then goes out into a little triangle or a little pennant.
Of course, all of these are traded the same way, we place an order to buy, if it breaks above and sell if it breaks down. Buy if it breaks above, sell if it breaks down. Buy if we break above, sell if we break down.
Now, in Narrow Sideways channels, we've talked about them. They have a more likelihood of having false breakouts, that I talked about up here in the 10 year T-Note. Triangles don't do that quite so often. They still do, but just not- I've noticed, personal observation I've noticed that they don't, triangles don't have as many false breakouts. That's why I much prefer to trade a triangle, than a narrow sideways channel.
See any in this one? There's a nice little pennant, right there. Look at this, a little sideways motion there, with a nice big long staff coming up, then going sideways, then jumping up again. There, we had the false breakout at the top and then it turned and went the other direction. There's another little, a little flag right there. It has a nice stand on it coming up, and then it goes sideways, then it dropped right back down. Of course, we trade these the same way, we break above on a buy on a break above and sell on a break down. There's another nice little triangle formation happening right there.
So, go around all these charts open up a whole bunch of charts, all the different charts, and markets that you like to trade. Look for these little formations and look whether you would've made money, or lost money, if you would've bought or sold on them.
If you break out on the top, you probably would've lost money, right there, because you probably held your stop loss back too far and you missed this turn. Unless, you were smart enough to reverse your market. That's pretty hard to do. If you're going to trade that, and I don't think I would've traded that one anyway, it's too hard, and too fast. But you know, maybe a little one like this, you could have traded. This little triangle here, for sure, you could have traded. Okay?
So, go and look through your charts, and look for your symmetrical, non-symmetrical triangles. Your ascending, your descending, your inclining, and your declining, your pennants, and your Bulls 'n Bear flags.
Just remember: They all trade the same, they're just a little bit different in where the point is on the triangle whether you're flat across the top, or flat across the bottom, or kind of stubby, or real elongated, up, way up like this, or way down like this. It doesn't matter. It's just the different shape of the triangle or the wedge, we still trade them all the same way.
So, go find them, and see how you like them!