To OP, if you think of trading as a type arcade game where you score points for the best timing, do you think you could code a system which catches stocks on a trend reversal breakout? Currents HIMS is experiencing a new highs breakout, what would be better in your opinion, a new trend breakout or new highs breakout?
Some background before answering. In college I did backtest patterns but it wasn't anything like I did right now. It is very regime(situation) dependent it seems. I was also doing it on the SP500 index, didn't find much value in that. I was still a proponent of price only unlike now, where it seems like I am analyzing the stock as a product to trade and assessing its likelihood of going up and going up now. I used to trade the SP500 and would time things pretty well, but this may be due to biases in my own belief in myself. Timing is a hard thing, but I think the biggest thing is that price has already moved in the direction you want. Catching the cat before it bounces is statistically low. The question you ask above I assume is really questioning a few things, to trade counter, see when to take profits, or to see when a counter-trend ends and start placing bets long(In this case the person is a long only person, also this is more in line with me "buying low"). Timing is probably the most important thing to focus on after risk management(having no capital to play with is no bueno). Okay back to your question. I probably could but I have to research how others have started to see support/resistance and trends in the markets. I never tried doing those two but I assume it must have to do with the timeframe you look at(e.g. 3years-1week, 1year-1week, 3months-1week). In this case progressively lower the time frame and define the highs and lows of that stock, but once again I have never researched this area. For trends it might be some sort of regression with the lows and the highs(e.g. group highs and lows and do a linear regression least squares(finding the best fit for the line)). So yes I probably could code something. It is very dependent on the asset. I think for this stock it won't go much higher due to the volume aspect. "... a new trend breakout ..." in this statement I am unsure if you mean it breaking out of the countertrend(which would be buying at the low for me). If you do then I would say this stock is best for that type of trading. It probably still has room higher though, maybe ? I do like betting, it seems . Edit: I do appreciate you asking me questions. Usually I ask them to myself. Thanks again.
Actually it's not, there are markers. Why do you think there are often volume spikes at tops and bottoms? Some traders poo poo volume, I think that's good as it proves they are clueless. In this instance I'm not saying use volume as an indicator, but use volume to prove your analysis is correct.
I'll expand on this, lets say your analysis says there should be a breakout at $35, and when price actually does pop at $35 there is no volume pop. In this case it is likely the breakout is dummy. It's dummy because there is a high probability there will be no follow through a little further down the track.
Trading is tricky though as smart money know how to fool the crowd. You could have well known technicals eg price crossing above MA200 and price might pop. But the move is false because smart money, wanting to exit, will pump price in the direction. They pump price up, get a better price, then do a sudden rug pull.
It's easier to fool the crowd at tops because that is where the crowd is. Hence, too many eyeballs on a stock is dangerous.
But there is another angle to look at, at extreme bottoms there is no crowd, there is very little eyeballs, so real breakouts can happen on low volume.
Now in this scenario, should there be a volume pop, it's probably confirmation you are onto something good.
Hmm, okay I see. I will still make some trades this week if the opportunity presents itself. Might be pretty busy for me these two/three months. I am going to do low size on all my trades. Will research slowly but need to focus on my exams as well. My main priority is to find a way to gather statistics via code. I have done some but I need to see problems/errors in my logic/approach. Been thinking of some interesting things for a while that may be beneficial. On the volume subject, I see what you mean. I think what you said is important and I have noted it. I need to develop/think things through more though.