DT1 Swing Trading Journal

Quote from DT1:



Hi Mars,

LRCX is a nice pick. This is the sort of breakouts I like to play. The only reason I did not spot it is that there is not significant increase on volume. I hope it will turn out to be a profitable trade for you.

On NSCN you are against the trend. It seems more risky to me, isn't it?. I am curious to know where you put your stop???

DT1
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DT1..

I am just curious to know why you need a confirmation of increase in volume to play a breakout?

I have done numerous studies and they all indicate there really is no difference in the 2-7 day holding perdiod..

I am just curious as to what research/testing you have done regarding above avg. volume breakouts? As I have stated before.. I believe the need for increase in volume in order to make a breakout valid is a myth.... I believe in most cases volume analysis gives you no edge.

--MIKE
 
This is what my swing trading studies do confirm and this is what I place emphasis on when selecting trade setups...


- Where the stock closed... for longs I want the close to be in upper range of the candle and i want the close>open. Basically I want a nice looking white candle.. and the opposite for shorts= nice looking black candle.

- Whether the stock itself is in uptrend or downtrend.. this can be confirmed by moving avg analysis.. for example.. is the 10ma>20ma? 20ma >30ma.. etc?

- Historical eye ball overview of past chart.. I look at the bars and see if this stock has a tendency to be trendy or choppy .. For example.. APOL,HON,MMM choppy... look how smooth GRTS,GRMN, NFLX


--MIKE
 
Mike, I think you could be right when you say that volume is a myth when it comes to validating a breakout. I like to see increase volume on breakouts, but I have no proof that it improves the probability of the breakout being correct. Could you share how you came to this conclusion in relation to volume? You could shed some light to us volume beleivers..


I think that the closing price is what's important. Volume and divergences can give cues, but the actual price confirms the breakout. I trade using the daily bars, so the closing price is important.
 
Quote from mars22:

Mike, I think you could be right when you say that volume is a myth when it comes to validating a breakout. I like to see increase volume on breakouts, but I have no proof that it improves the probability of the breakout being correct. Could you share how you came to this conclusion in relation to volume? You could shed some light to us volume beleivers..


I think that the closing price is what's important. Volume and divergences can give cues, but the actual price confirms the breakout. I trade using the daily bars, so the closing price is important.
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Sure.. this is what I have done.. a while back...

I took a handfull of fairly liquid stocks.. and ran a simple backtest looking for breakouts with above avg volume .. and breakouts with lower than avg volume.. the results were always similar...

For example.. Assuming I took NVDA... i would run a test like this.. todays close is greather than the highest high of the past 10 days or whatever.. then I would say exit.. in 1 bar through 7 bars.. then I played around with different volume parameters... the more I tested.. the more I noticed there really was no difference and it was just a myth.

My own experience confirms this.. for every high volume breakout that works.. there is a low volume breakout that works just as well..

Maybe if you hold for more than 7 days.. volume might make a difference for intermediate term traders (like tha canslim folks).. but for swing traders (1-7 days) there is no edge.


What actually makes a difference in a setup.. is what I have outlined above.. ( which is only price related). When trading breakouts.. to me the close is the most important.. which is why I only enter breakout trades at the close.


--MIKE
 
Quote from Trend Fader:

This is what my swing trading studies do confirm and this is what I place emphasis on when selecting trade setups...


- Where the stock closed... for longs I want the close to be in upper range of the candle and i want the close>open. Basically I want a nice looking white candle.. and the opposite for shorts= nice looking black candle.

>>> So do I

- Whether the stock itself is in uptrend or downtrend.. this can be confirmed by moving avg analysis.. for example.. is the 10ma>20ma? 20ma >30ma.. etc?

>>> I always trade in the direction of the trend now. I never short sell a stock trading above its 200ma or buy a stock trading under its 200ma.
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This is whats most important to me...

Lets say.. we have a stock in a nice uptrend.. then it decides to pause... it forms a series of narrow range bars for 10-15 days.. then one day it forms a big white candle breaking out of the narrow range.. Normally I would wait until the close to make sure it stays a nice white long candle.. and jump on this trade...

Some other traders would say.. strong volume has to confirm the breakout.. and also.. they wanna see low volume during the narrow range bar and the high volume pickup on the breakout..

In my experience.. you can take out volume from the equation and get good results for both.. the only difference would be that the non volume trader would have a greater frequenccy of trades.. with a similar expectancy to the volume trader..

--MIKE
 
Quote from Trend Fader:



Sure.. this is what I have done.. a while back...

I took a handfull of fairly liquid stocks.. and ran a simple backtest looking for breakouts with above avg volume .. and breakouts with lower than avg volume.. the results were always similar...

For example.. Assuming I took NVDA... i would run a test like this.. todays close is greather than the highest high of the past 10 days or whatever.. then I would say exit.. in 1 bar through 7 bars.. then I played around with different volume parameters... the more I tested.. the more I noticed there really was no difference and it was just a myth.

My own experience confirms this.. for every high volume breakout that works.. there is a low volume breakout that works just as well..

Maybe if you hold for more than 7 days.. volume might make a difference for intermediate term traders (like tha canslim folks).. but for swing traders (1-7 days) there is no edge.


What actually makes a difference in a setup.. is what I have outlined above.. ( which is only price related). When trading breakouts.. to me the close is the most important.. which is why I only enter breakout trades at the close.


--MIKE
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Hi Mike,

In the first place I am not looking at breakouts. I look for raising volumes. Then if there is a breakout it is better but not necessary. I think that when volume is moving up something is happening on the stock. It is generally the begining of a move and this is why I am interested in these kind of set ups.

It is a good idea to backtest. For a while I used Esignal but did not really like it. You can only backtest a stock and not the entire market. What do you use for your backtesting analysis?

DT1
 
Quote from DT1:



Hi Mike,

In the first place I am not looking at breakouts. I look for raising volumes. Then if there is a breakout it is better but not necessary. I think that when volume is moving up something is happening on the stock. It is generally the begining of a move and this is why I am interested in these kind of set ups.

It is a good idea to backtest. For a while I used Esignal but did not really like it. You can only backtest a stock and not the entire market. What do you use for your backtesting analysis?

DT1
More...

Raising volume can also be the end of a move.. so be carefull with this type of analysis... How do you know if its the beginning of a big move.. or just a climactic blow off? Again I think in reality there is no edge with this type of analysis.. ( just my opinion)

I use metastock mostly for basic stuff... I am not really into backtesting.. I was just curious whether volume really made a difference..
 
Quote from Trend Fader:



Raising volume can also be the end of a move.. so be carefull with this type of analysis... How do you know if its the beginning of a big move.. or just a climactic blow off? Again I think in reality there is no edge with this type of analysis.. ( just my opinion)

>>> You might be right. Breakouts may not have to be confirmed by volume spikes to be valid. Actually I have no statistic on that.
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Quote from DT1:

Hi all,

I am so disapointed today. I could not follow the market and missed some nice picks. I could not take any position but if I could I would have bought SBL, HAIN and DRIV. The patterns look very promissing.

Did anyone here bought these stocks?

DT1
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All these stocks did well today. I had a nice diner on friday night but finally it is costing me some money :-)
 
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