In order to backtest a breakout system, I need to be able to rank each day’s breakouts so that when the system has cash available for a new position, it takes only the top-ranked stocks. I have my suspicions about what makes a great breakout, but I’m curious as to what other traders believe.
As I begin backtesting breakouts, I’ll cycle through the factors represented in the poll to see whether the crowd gets it right, or not. If there are other factors that can be used to rank breakouts, I’d love to hear about them in the comments. I can add them to the backtesting.
[polldaddy poll=4588227]
This is getting interesting.
I’m glad!
A “breakout” means lots of different things to different people. I’ve realized as I’ve been quantifying it that perhaps I’m being too specific. Or perhaps I’m not. Who knows. Some folks see a new 20 day high and call it a breakout. Others want to see a break above some sort of base in order to call it a breakout. Beyond these vagaries, then we must rank each breakout.
There is a lot to consider.
I voted for “breakout from tight range”. Seems to me the first two go hand-in-hand. How many times do you see a 30% gain that’s not on big volume? Interested to see how this works out.
I agree Pimp.
(laughter) “associated riots and panic” doesn’t seem to be an option.
Hard to quantify 😉
interesting piece on breakout plays:
http://srsfinance.com/articles/stock-technical-analysis/bullish-ascending-triangle-pattern-success-rate-updating-bulkowski/
maybe you’ve seen this:
http://srsfinance.com/articles/stock-technical-analysis/bullish-ascending-triangle-pattern-success-rate-updating-bulkowski/
What about the length of time spent consolidating?
That will be a factor when we look at the range that existed before the breakout occurred. Definitely something to consider. It may be difficult to define consolidating. Any ideas?
That seems like a tough one. Seems like there’s a lot of variables to account for. You’d have to have some way of quantifying the magnitude of the consolidation. First of all you’d need a definition of a consolidation, which I take to be one of those things that everyone can spot but is a little undefined, mathematically. Then you’d have to assess the length and give that a weighting. You’d have to answer questions like, What percentage move up or down ends the consolidation period? How long does the X% move have to hold for to count as a breakout? What constitutes a fake breakout and how does that affect the quantification of the consolidation? And so on…. Bear in mind I’m talking well outside of my pay grade here, but all in all, it seems like a tough one to figure out.
Stock tiger has a great site with a daily updated watch list most all are break outs watches
Stoctiger.net
Thanks Wood
Thanks. I’ll check it out.