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Breakout Trading Filters

Discussion in 'Trading Strategies/Systems' started by pavilion103, Mar 1, 2011.

  1. pavilion103

    pavilion103

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    I have studied a number of entry methods and breakout trading really appeals to me.

    What are some of the filters people use in their searches for breakouts e.g. highest high of last 40 days, volume above a certain amount.
    What AND or OR functions do people like to include.

    I'm not asking for entire entry signals that you might have for your system but just some valuable things to look for.

    Thanks,
    Matt:)
     
  2. tech/a

    tech/a No Ordinary Duck

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    Look at breakouts on LOWER than average volume.
    This indicates supply at this level (Normally a highest high for sometime) isn't coming into the market.
     
  3. TulipFX

    TulipFX

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    Look for breakouts on the second attempt at breaking resistance especially with relatively low momentum indicators.
     
  4. pavilion103

    pavilion103

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    I noticed that you mentioned this one previously Tech/a.

    I understand from a theory point of view but can't reconcile how this goes against most of the things I've read about trading on heavy volume to confirm a strong breakout. Are you saying you do the complete opposite and that lower volume confirms a strong breakout for you?
     
  5. pavilion103

    pavilion103

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    What does a low momentum indicator for a breakout suggest?
     
  6. tech/a

    tech/a No Ordinary Duck

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    You need to study breakouts and recognize when volume is Supply or Demand.
    Breakouts on heavy volume CAN be excellent prospects but can and do turn and reverse as quick as they take off.

    Its a long journey not one we can take you through in a thread.
     
  7. pavilion103

    pavilion103

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    It is comforting to hear people telling me that it's a long journey. Sometimes I think I am missing something that I should know. I am not afraid of some hard work and I spend most nights after work working on this stuff until 10:30pm.

    I just want to fast track my development as much as I can. I will read more about it.
     
  8. pavilion103

    pavilion103

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    With my current filers: HHV, C>O, V
    I am getting between 25-45 results daily.

    I am curious as to how many companies usually show up for most people in their filters? I am only looking to hold about 10 trades at any one time so obviously this amount of results is excessive.

    Do people get a large amount of results like this and sift through them? or should I add further filters to narrow it down? Any suggestions on other filters?

    Thanks,
    MM
     
  9. tech/a

    tech/a No Ordinary Duck

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    Of the 5 I use (For breakouts and patterns following breakouts (Theres a hint for another suggestion)
    1 gave 2 (The one I gave you)
    1 gave 3
    1 gave 8
    1 gave 25
    1 gave 37

    You can have a look at the prospects I filtered by Eye out of those
    SEA
    GLF
    NRL
    CAA
    BPT

    All now have a final buy trigger to hit before they are in my portfolio.
    I set stop limit orders with bracket orders attached.
     
  10. TulipFX

    TulipFX

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    Say you are looking for a breakout and using a stochastic indicator. If it is in the lower to medium part of its chart and moving upwards when it breaks through a resistance, chances are it will keep moving through it.
     
  11. pavilion103

    pavilion103

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    Is there any recommended reading on this that you can point me towards?
     
  12. pavilion103

    pavilion103

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    Does that indicator measure positive and negative or just a measure of strength, so if it is moving upwards from the lower to medium part of the chart for both a potential long AND short trade it is a strong sign?


    And how would I create a filter for this?
     
  13. pavilion103

    pavilion103

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    Is it also a good idea to use volatility filters? I don't know anything about this but it came to mind because I'm thinking we want to trade companies with enough volatility.
     
  14. Wysiwyg

    Wysiwyg Everyone wants money

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    I think you'll find stochastics and for that matter most indicators follow price movement. Therefore if the price is making a new high the stochastic will be heading in the same direction or very high already. Anyways I have set the stochastics parameter setting to the extreme to show this.

    PHP:
    Period Param("StochK Period"1452501);
    Rangeup Param("StochK Range Up >"9020801);
    Rangedown Param("StochK Range Down <"1020801);

    Criteriaup Ref(HHV(C,25),-1) & MA(C,40) & V*500000;
    Criteriadown Ref(LLV(C,25),-1) & MA(C,40) & V*500000;

    Buy StochK(Period) > Rangeup Criteriaup
    Short StochK(Period) < Rangedown Criteriadown;

    Filter Buy OR Short;

    AddColumn (C,"Buy"1.2IIf(BuycolorBluecolorWhite), IIf(BuycolorSeaGreencolorWhite));
    AddColumn (C,"Short"1.2IIf(ShortcolorDarkRedcolorWhite), IIf(ShortcolorOrangecolorWhite));
    AddColumn (V,"Volume"); 
     
  15. tech/a

    tech/a No Ordinary Duck

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    Master the Markets by Tom Williams.Available through these guys.
    http://www.tradeguider.com/
     
  16. timkot

    timkot

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    Generally speaking look at the pace of down move as against up. Lets say you have a high of some description and then the market goes down for 33 days into the retracement low and then starts up, well if by the time it actually breaks out of the previous high and it takes more than 33 days then at best we have to consider the momentum up as less than the momentum down, so in fact we should expect a false breakout to the upside before it retreats back inside the old top to whatever degree its going to do.

    Clearly if it takes more than 33 days to break out it means that whoever is doing the buying is generally not that confident because if they were, they would shove the market up quickly with impulsive bars in the bull direction. Also look at layers, if you get rectangel action occuring on the up move below the old top then it gives you a base from which to make an evaluation. A couple of the big time traders I know who make many squillions a year, trade on the daily and weekly charts but actually attune their entries and stops etc to the intraday structure.

    Look for eg at the turtles type strategy using a 2 bar type stop and lets assume each bar is 1 dollar in length so we are risking a range of 2 dollars, well if you look on the intraday chart you might see a lot of sideways action say a quarter of the way down from the top, in other words 50 cents down from the brekaout price you find good sideways action which inidicates a battle occured at those prices and the bulls one. Well why put your stop back on a 2 dollar risk if you can put it just below the 50 cent action as clearly indications are that a battle ensued at that point and the bulls won. So we can say that the market should not come back below that sideways action.
     
  17. tech/a

    tech/a No Ordinary Duck

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    You Dont need an oscillator to do this you can do it purely on price.
    If price breaks through resistance or support for that matter with low to average volume it means No supply at resistance and No Demand at support.

    Then of course there is the issue of identifying "meaningful" support and resistance
    there are many ways of determining a support or resistance zone point or area---besides the standard pivot high/low.
     
  18. pavilion103

    pavilion103

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    I've started reading Master the Markets now. About 25 pages in. I'm reading it really slowly to absorb it. I get the feeling this book will be vitally important, as volume is only something I've briefly touched on thus far.
     
  19. AlterEgo

    AlterEgo

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    Hi Tech,

    Could you elaborate on what method(s) you find most useful to determine support/resistance zones?
     
  20. tech/a

    tech/a No Ordinary Duck

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    One of my very favorites you wont find in books. Its one I believe I have been the first to develop.

    Below is a chart explaining it all.
    CLICK TO EXPAND

    Volume support and resistance.jpg
     
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