Break-outs and pullbacks

Discussion in 'Technical Analysis' started by fatrat, Jan 18, 2007.

  1. spinner


    Dan Zanger's method is basically trading breakouts. He's got tens of millions of dollars in documented successful trading. I won't vouch for actually being able to learn it from his website/newsletter (in fact I think he may have said that he has rarely if ever taught other people his method) but you can at least see it being demonstrated since he does supply actual picks with entry/exit signals each night (using daily charts on equities). I'm pretty sure he has a free trial period.
    #21     Jan 19, 2007
  2. nkhoi

    nkhoi Moderator

    #22     Jan 19, 2007
  3. There was almost a hammer right after the first big red candle. Good thing you didn't enter long there.

    And, there was an upside down hammer (shooting star?) right after your point 3. Good thing you didn't short there.

    I probably have these candle formations wrong, but that's what they looked like to me.
    #23     Jan 21, 2007
  4. rosy2


    I don't. How do you know? There can be many interpretations of a breakout. which one is correct?
    #24     Jan 21, 2007
  5. You might be missing something. The behavior of prices provides information about conditions. I recall instances during what might be called "near the top of the bull market" when price breakouts do not show trend continuation. The lack of trend continuation shows there is not enough buying power to put the price to greater values and keep price at greater values. In contrast, near what might be called "the beginning of the bull market" I recall almost 100 % of upside price breakouts show trend continuation. Trend continuation means more money follows me when I buy.

    I recall during what might be called "near the top of the bull market" stock price fluctuation trading (rallys that might continue about 10 to 20 sessions) is popular. Traders learn that they can buy low and sell high for a fast profit of about 10 %. Some traders might buy near the value of the 40 day moving average, observe price rally above the historic high price, then sell into the rally about three sessions later.

    I recall buying stocks near the 40 day moving average and losing lots of money if price gaps to lesser values. I recall many instances when what some people might call a "bear market" begins and I did not recognize the signs until after taking losses.

    I suspect when price breakouts repeatedly fail to show trend continuation then the upward trends are ending (and possibly downward trends are beginning).
    #25     Jan 21, 2007
  6. Fatrat,

    I buy what might be called "upside breakouts". I do not trade pullbacks.

    Attached is a little study. I recall examining a list of stocks and testing price breakout systems using 1 % risk. The systems are single time constant systems, in other words if the time constant is 120 sessions then entry is at the greatest price of the prior 120 sessions and trade exit is at the least price value of the prior 120 sessions. This system tests only the first trade following initial public offering.

    I stopped this study because it is not scientific and probably meaningless. The study has a survivorship bias. However I am finding that a similar method performed as real trading with real money in real time is generating about 10 % growth of equity at 0.3 % risk. The real time method shows disappearing stocks as a result of mergers and acquisitions, but tender offer situations are profitable.

    What I find interesting about this study is that all time constants tested from 60 sessions to 504 sessions (about 3 months to 2 years) show profitable outcomes. There are many losing trades but the overall outcome is profitable. The study begins year 1991. Remember this system trades each stock only one time.
    #26     Jan 21, 2007
  7. nkhoi

    nkhoi Moderator

    68 onlookers and 0 comments? not even a oh, common 6% compound daily, you must be joking! And here I am sweating profusely for letting the cat out of the bag. I am just too darn easy to excite, nevermind :(
    #27     Jan 22, 2007
  8. hustler


    Could you please give a little background info on this, what is this? Thanks!
    #28     Jan 22, 2007
  9. hcour

    hcour Guest

    Well, speaking from a Wyckoff pov, one doesn't just look at the vol, but the price bar spread, the open and close, and price change, as well as its location. Say you're in a consolidation and price is sitting the top of the range resistance and there is a "doji" (relatively narrow spread, open and close about equal, very little price gain) on very high vol. To me this would suggest distribution because of the combination of price and vol factors and where price is at the time. Or a wide spread closing on the high on low vol, this would suggest a lack of supply rather than great demand. Or a wide spread on strong vol closing on the low, perhaps "upthrusting" the highs of a range, this is a completely different scenario than a strong vol bar closing on its high. Hence, what Wyckoff referred to as price/volume analysis, not just vol analysis.

    As a "Wyckoffian", I consider price to be of primary importance, and vol can indeed be misleading, but it can also provide relevant clues at certain times.

    #29     Jan 22, 2007
  10. bluedemon77

    bluedemon77 Guest

    OK, since you asked, I listened to this for nearly two hours and got very little out of the presentation.

    Jack seems like a very charismatic, likeable guy and his heart seems to be in the right place. As far as I know, he doesn't make any money from books, seminars and so forth, so has no motivation to "sell" people anything, he just wants to help. That's an unusual thing here on ET. I have no doubt that he believes what he is saying about changing the world through trading. I'm just not sure his system actually works.

    I played around with Jack's system a little a few months ago, but going through all of the little rituals didn't seem to be very fruitful. Maybe I gave up on it too quickly or maybe I didn't really understand it, but I think I did. I would love to believe I could make 2%, hell 1%, per day on a consistent basis and double my account size in three months. That's a pretty outrageous claim. Has anybody done that, including Jack's lead disciple, Spydertrader or you, nkhoi? There is a huge difference between making 6-10% on a trade now and then versus consistently making money. If somebody would PM me and say "hey, I did it and consistently make 2% per day following Jack's system to the letter," I'll be utterly and eternally grateful. I'm not lazy and I don't mind doing the work, I just don't want to spend hours and hours working on something that isn't real.

    I'm not trying to put anybody down or rain on anybody's parade. You asked what I thought of the presentation, so I'm telling you. Neither of my socks were knocked off.
    #30     Jan 22, 2007