The SSE composite index, commonly known as Shanghai Composite Index where all the A shares and B shares are being traded in the financial market. Professional long-term trader’s trades the SSE composite index with the combination of technical and fundamental analysis. Shanghai Composite Index tends to form important price pattern in the chart over the course of time which creates profitable trading opportunities for the long term traders.
The most profitable chart pattern used by the professional traders is triangle chart pattern. Most of the time breakout occurs in the direction of the prevailing trend in the triangle chart pattern while trading the Shanghai Composite Index. Let us see an example triangle chart pattern trading in Shanghai Composite Index:
Figure: Trading the bullish breakout in triangle pattern
The initial price movement during the formation of triangle pattern is much wider. With the course of time, the price tends to seize its movement inside a narrowly confined region which makes the triangle pattern. The more it comes closer to the edge, the higher is the probability of the breakout. In the above figure, traders draw a valid triangle pattern in the Shanghai Composite Index. A valid triangle pattern must have at least three connection points in the baseline of the triangle and three connecting points in the resistance line.
After the successful breakout of the triangle pattern traders enter in the direction of the trend with a tight stop loss below the breakout triangle base for the bullish breakout. There are some professional traders who use the conservative method to trade the breakout for better risk reward ratio. They wait for the minor retracement of the price near the triangle support or resistance level and enter into the trade. But retrace entry is not a wise option in Shanghai Composite Index trading since the triangle pattern takes at least three months to complete the formation and the market rarely retraces back for the second trading opportunity.