Rectangles have been very popular with traders over the years trading the chart pattern when it breaks out in either direction. A rectangle is defined by two lines, one on the upper boundary of the price movement and one on the lower boundary, both of which are horizontal. The lines are parallel. These can be referred to as consolidations or channels, or the well known Darvas Box, used by Nicolas Darvas to make $2 million in the markets.

The descending wedge is a very well known chart pattern that you would expect to trade on the long side, but can also be traded if it breaks out to the downside. A descending wedge is formed when the price action is contained within two lines. Both the bottom line and the top line slope down, but the top line has a steeper slope meeting the bottom line.

Descending triangles have been very popular with traders on the short side and are not so often traded when it breaks in the upward direction. A descending triangle is defined by two lines, one on the lower boundary of the price movement which is horizontal and one on the upper side which slopes down.

The ascending triangle chart pattern is a very well known pattern that has been used by many successful traders over the years on the long side, but is not always traded short. An ascending triangle is formed when the price action is contained within two lines. The top line is close to horizontal while the bottom line slopes up towards the top line.

Descending triangles are not so popular with traders on the long side and are best traded when it breaks in the downward direction. A descending triangle is defined by two lines, one on the lower boundary of the price movement which is horizontal and one on the upper side which slopes down.

The two critical numbers to know when you are trading is the risk reward ratio and the winning percentage or hit rate. Understanding these numbers will go a long way to improving your trading.

I am sure that if you have traded before you have made at least one of these dumb mistakes at some point in your trading career. It is very easy to avoid the mistakes by developing a few simple habits.