5. Descending Triangle Breakdown

Entry Logic

Price closes below the horizontal support of the descending triangle. Confirm with 1.5x average volume. Use 5-minute chart. Entry after breakdown candle close. Market condition is bearish or consolidating.

Exit Logic

Target 1: Measure height of triangle base and project downwards (100%). Target 2: 1.5x triangle height. Scale out 50% at Target 1. Trail stop with 10-period EMA. Exit if 5-minute candle closes back inside triangle. Exit all after 75 minutes if profit not met.

Stop Loss Structure

Hard stop 0.3x triangle height above breakdown candle high. Max dollar loss $200. Max percent loss 1.5% of account. Structural stop at the horizontal support level.

Risk Management Framework

Risk 0.75% of account per trade. Daily loss limit 2.5%. Weekly loss limit 6%. Max drawdown 9%. R:R requirement 1.75:1 minimum for initial target.

Position Sizing Model

Size to risk 0.75% of account. Adjust for triangle height volatility. Increase size by 20% for A+ setups. Scale in 50% on initial entry, 50% on successful retest of breakdown.

Trade Filtering

Avoid low volume triangles. Trade during active sessions. Focus on stocks with clear daily trend. Avoid major economic announcements.

Context Framework

Daily trend is downward or neutral. VWAP is above price. Price below 20-period SMA. Triangle forms after a strong move. Higher timeframe (15-minute) shows similar pattern or bearish trend.

Trade Management Rules

Move stop to breakeven after 0.75R profit. Scale out 50% at 1R. Add size on confirmed retest of breakdown level. Manage initial move aggressively.

Time Rules

Optimal window 10:00 AM - 12:00 PM EST. Avoid first 30 minutes of market. Avoid late afternoon.

Setup Classification

A+: Clear horizontal support, falling highs, high volume breakdown. A: Clear pattern, good volume. B: Less defined pattern, moderate volume. C: Low volume, choppy price action within triangle.

Market Selection Criteria

Instruments: Growth stocks, tech stocks. Volume: Min. 1.5M shares daily. Volatility: ATR > $0.75.

Statistical Edge Metrics

Win rate 60%. Avg win $280. Avg loss $120. Profit factor 2.3. Expectancy $96 per trade.

Failure Conditions

Breakdown on low volume. Price re-enters triangle and breaks higher. Market sentiment turns bullish.

Psychological Rules

Be patient for breakdown. Do not anticipate. Follow the plan. Avoid overconfidence.

Advanced Components

Regime detection: Use Volume Profile to confirm distribution. Filter: RSI divergence prior to breakdown. Correlation: Monitor sector weakness. MTF alignment: 5-minute breakdown, 30-minute trend confirmation.

Location

Strongest near daily low. Weakest in middle of daily range.