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Breakout Trading Searching Methods?

Thread starter krampster2
Start date 5 January 2014
Tags

breakout search parameters breakout trading breakout trading searching methods breakouts short term investing

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5 January 2014

#1

K

krampster2

Fairly new to trading, am currently breakout trading on paper. Short term stocks, about 1-4 weeks. But it seems my biggest issue is actually searching for stocks, none of the books or tutorials I've read really cover this properly. I use Market Analyst 7 and I have no clue what search parameters to use when looking for stocks that have just broken out of consolidation. I always end up trawling though a bunch of stocks worth not even a cent with funny looking charts with completely flat candlesticks. Or really sporadic and volatile stocks with candlesticks as tall as skyscrapers which I can just not make any sense of. So can anyone recommend to me what search parameters I should be using? Or what your process is when searching for breakouts?

5 January 2014

#2

V

Valued

Re: Break out Trading Searching Methods?

Well you would be looking for a scan that would search for a trading range first before you get to the new high (assuming you are only going to go long). You might look at something like this to pick stocks that arn't terrible/in trading ranges:

Where price between $0.50 and $500
Where Price (High)
Is Within 5% Above or Below
Price - Simple Moving Average (21 DAILY)
For all of the 14 Trading Days Prior to the Last Trading Day
Where Volume
Is Greater Than 50000
For all of the 14 Trading Days Prior to the Last Trading Day

This would look for all stocks over 50 cents trading with 50k or more volume and has been close to the 3 week SMA for the last 2 weeks. These variables can be changed of course. This would show you a trading range. Then you add in that the last trading day close was higher than 5% of the 21 day SMA.

This scan wouldn't get you all the breakouts but it's a start. I don't know if 21 day SMA is the best, that might be quite arbitrary. It probably makes more sense to use a 14 day SMA given the scan is looking for stocks in a trading range for the last two weeks.

Disclaimer: I don't recommend you should trade stocks just because they come up on the result of this scan or any variant of it. This is just a scan to show you breakouts as an educational tool, especially as you told us you are paper trading i.e. learning.

5 January 2014

#3

K

krampster2

Re: Break out Trading Searching Methods?

Valued said:
Well you would be looking for a scan that would search for a trading range first before you get to the new high (assuming you are only going to go long). You might look at something like this to pick stocks that arn't terrible/in trading ranges:

Where price between $0.50 and $500
Where Price (High)
Is Within 5% Above or Below
Price - Simple Moving Average (21 DAILY)
For all of the 14 Trading Days Prior to the Last Trading Day
Where Volume
Is Greater Than 50000
For all of the 14 Trading Days Prior to the Last Trading Day

This would look for all stocks over 50 cents trading with 50k or more volume and has been close to the 3 week SMA for the last 2 weeks. These variables can be changed of course. This would show you a trading range. Then you add in that the last trading day close was higher than 5% of the 21 day SMA.

This scan wouldn't get you all the breakouts but it's a start. I don't know if 21 day SMA is the best, that might be quite arbitrary. It probably makes more sense to use a 14 day SMA given the scan is looking for stocks in a trading range for the last two weeks.

Disclaimer: I don't recommend you should trade stocks just because they come up on the result of this scan or any variant of it. This is just a scan to show you breakouts as an educational tool, especially as you told us you are paper trading i.e. learning.

Thanks for that. I'll have to figure out how create search scripts. Market analyst doesn't offer enough ready made search functions. But this looks like it would find the stocks I want to trade.

5 January 2014

#4

tech/a

No Ordinary Duck

Re: Break out Trading Searching Methods?

Hint
Few breakouts take off and ever return.
Search with a 5 day alert function.
Eg highest high value of the preceding 70 periods.
Looking back 5 days
This will toss up a lot of breakouts testingthe breakout level
And many pre breakout continuation patterns.

For explosive moves look for an increase in the 2 day M / A of
Volume x 5 times or more.
Then have the guts to go with it.
Look for blow off tops when trading impulse moves.
To exit!!

5 January 2014

#5

K

krampster2

Re: Break out Trading Searching Methods?

tech/a said:
Hint
Few breakouts take off and ever return.
Search with a 5 day alert function.
Eg highest high value of the preceding 70 periods.
Looking back 5 days
This will toss up a lot of breakouts testingthe breakout level
And many pre breakout continuation patterns.

For explosive moves look for an increase in the 2 day M / A of
Volume x 5 times or more.
Then have the guts to go with it.
Look for blow off tops when trading impulse moves.

Okay, sounds solid. What about consolidation though. Is there anything more I can throw in there to get it to search for consolidation preceding the breakout? Or is that not necessary, better to trawl through the results looking for it.

5 January 2014

#6

tech/a

No Ordinary Duck

Re: Break out Trading Searching Methods?

krampster2 said:
Okay, sounds solid. What about consolidation though. Is there anything more I can throw in there to get it to search for consolidation preceding the breakout? Or is that not necessary, better to trawl through the results looking for it.

Yes you can
There are many ways to identify and enter
Potential breakouts.

5 January 2014

#7

V

Valued

Re: Break out Trading Searching Methods?

I use stockscan to make the searches. It's 30 bucks a month for the more basic package which gets you up to 5 scans at a time and 6 months of back testing. You can run the scans when you like.

It's probably a waste of money given that charting programs could do the same thing likely but it's easy to use. The website does all the hard work too. My understanding is the people who run it also help you build your scans if you are a paying member. However, it's a very easy GUI to do it in. The only draw back is to get more than 5 individual scans you have to pay over twice the money. At the same time, you can change the scans when you like. You could keep a copy of your scan criteria and run through them on weekends. It only uses EOD data. The advantage with it is you use their data so you don't pay any extra for that like with a charting program.

5 January 2014

#8

K

krampster2

Re: Break out Trading Searching Methods?

Valued said:
I use stockscan to make the searches. It's 30 bucks a month for the more basic package which gets you up to 5 scans at a time and 6 months of back testing. You can run the scans when you like.

It's probably a waste of money given that charting programs could do the same thing likely but it's easy to use. The website does all the hard work too. My understanding is the people who run it also help you build your scans if you are a paying member. However, it's a very easy GUI to do it in. The only draw back is to get more than 5 individual scans you have to pay over twice the money. At the same time, you can change the scans when you like. You could keep a copy of your scan criteria and run through them on weekends. It only uses EOD data. The advantage with it is you use their data so you don't pay any extra for that like with a charting program.

I've never heard of such a program. Does it present you with charts or just the names of the stocks which meet your criteria? Is it simple to script your own search parameters? Sounds useful.

5 January 2014

#9

tech/a

No Ordinary Duck

Re: Break out Trading Searching Methods?

Invest $300 in Amibroker.
Many canned formulas.
You should too Valued.
Makes stock scan look like
An abacas v a computer.

5 January 2014

#10

V

Valued

Re: Break out Trading Searching Methods?

krampster2 said:
I've never heard of such a program. Does it present you with charts or just the names of the stocks which meet your criteria? Is it simple to script your own search parameters? Sounds useful.

It's just a website lol. http://www.stockscan.com.au/

Trust me it's not hard. I can't program, script or even add numbers together. Don't worry!

@Tech/a I probably should. I have to chargeback tradeguider probably anyway since it looks like they arn't delivering the program to me. The payment goes to the email of some guy who probably is on holidays and they won't be able to verify it for weeks. Amibroker might do a similar job.

5 January 2014

#11

K

krampster2

Re: Break out Trading Searching Methods?

tech/a said:
Invest $300 in Amibroker.
Many canned formulas.
You should too Valued.
Makes stock scan look like
An abacas v a computer.

Have you seen Market Analyst 7? Seems like a good program too me but no one on here ever talks about it.

5 January 2014

#12

V

Valued

Re: Break out Trading Searching Methods?

krampster2 said:
Have you seen Market Analyst 7? Seems like a good program too me but no one on here ever talks about it.

The software is extremely expensive for one. The $4000 version has tools with a basis in astrology. That's clearly BS. I don't know much about the base software though. Amibroker is $299 for the professional version, so much cheaper. EOD data is also free off yahoo.

There are no certainties in markets, except for the fact that astrology is still BS.

5 January 2014

#13

K

krampster2

Re: Break out Trading Searching Methods?

Valued said:
The software is extremely expensive for one. The $4000 version has tools with a basis in astrology. That's clearly BS. I don't know much about the base software though. Amibroker is $299 for the professional version, so much cheaper. EOD data is also free off yahoo.

There are no certainties in markets, except for the fact that astrology is still BS.

Is Amibroker popular? Would prefer to use something with a big user base to make learning how to use the program easier and to know that it's trusted.

5 January 2014

#14

V

Valued

Re: Break out Trading Searching Methods?

krampster2 said:
Is Amibroker popular? Would prefer to use something with a big user base to make learning how to use the program easier and to know that it's trusted.

It looks reasonably popular/recommended. I haven't used it though. It seems to be featured on some large sites. I have heard people say good things about it on here. It has a lot of features by the looks of it, so as to suit various trading styles.

5 January 2014

#15

K

krampster2

Re: Break out Trading Searching Methods?

Valued said:
It looks reasonably popular/recommended. I haven't used it though. It seems to be featured on some large sites. I have heard people say good things about it on here. It has a lot of features by the looks of it, so as to suit various trading styles.

Alright, I'll look into it

6 January 2014

#16

tech/a

No Ordinary Duck

Re: Break out Trading Searching Methods?

krampster2 said:
Have you seen Market Analyst 7? Seems like a good program too me but no one on here ever talks about it.

That must say something on it's own!

9 January 2014

#17

Newt

Krampster, you would probably get a lot of value out of purchasing a copy of Nick Radge's "Unholy Grails". Search the site for many positive reviews from ASF regulars. It can be disheartening when your first dozen programmed systems in Amibroker lose money or struggle to break even. Once you see evidence for some basic workable momentum strategies its an ah-ha moment. And also the start of hundreds of hours tweaking Amibroker code

10 January 2014

#18

Wysiwyg

Everyone wants money

Newt said:
And also the start of hundreds of hours tweaking Amibroker code

How surreal this is. Lot of time taken to learn the money is in the exit.

11 January 2014

#19

Newt

Que? Exit only useful if method and entry are decent. How long do you hold, how much capital, how much drawdown and strategies to control, emotions, expectancy, how to get a handle on decent backtesting? Helps to start knowing at least what the questions are and what tools you have to look for answers. Maybe I'm just an AFL junkie now
Certainly not afraid to roll my sleeves up to make damned sure I trust my data.

UGs might be a good read for you before throwing in the towell on trading and switching solely to property investment, if I've understood other recent posts...?

11 January 2014

#20

tech/a

No Ordinary Duck

Wysiwyg said:
How surreal this is. Lot of time taken to learn the money is in the exit.

I agree but would add that the exit covers
Stop/trailing stop/trade close exit.
If you think about it it covers a great deal
Of Risk / Money Management and then----profit.

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