This is a mobile optimized page that loads fast, if you want to load the real page, click this text.

Is it Possible to pick Bottoms or Tops - consistently?

Jump to new
Is it Possible to pick Bottoms or Tops - consistently?

No

Buying the bottom is ALWAYS luck, if there was a way to do it then i imagine people would be doing it and making a motza, or at least selling a training course on how to do it and making a fortune.
 

Just because you think it's luck does not mean it can't be done. With proper analysis the bottom should be able to be picked more often than not. Consistently does not mean always. For example, with consistent profits you would not expect to win on every trade.

Now picking the very bottom down to the cent would be absurd. I think when talking about picking tops and bottoms, we have to be talking about picking them within say 5 - 10% of the top or bottom before a major new bull or bear market. I think it can be done more often than not. I am not saying I can do it right this minute but I think I can apply proper analysis to take an educated view point of where we are bottoming out or topping out. I need more time to figure it out but from what I can see, it can be done.

The reason I think many people fail at this is they open up a charting package of 400 mechanical indicators and try to combine them into holy grails. They say "Wow the MACD is doing this when the price is doing that, it's a BUY!". Really it just doesn't mean anything. It's just some lines that react to the price action.

I don't believe in Elliot Wave, or at the very least I am indifferent to it (since in many cases a proper application of technical analysis will predict the same wave movements anyway) but people who use Elliot Wave seem to think they can predict tops and bottoms. Those who use Volume Spread Analysis believe they can do the same thing.
 
Personally I think it important for ANY discipline of trader.
While bottoms seem to be the focus I would argue that seeing a top is more important.
Many could have avoided a lot of Damage in 2008 but didn't.


https://www.aussiestockforums.com/forums/showthread.php?t=6211&page=2


You may be interested in reading post #28 then having a look at the outcome.
I didnt have a lot of support at the time of the post.
But It was well before history!
 

I agree all down to luck and probability, no system, no charts, nothing can predict this outcome...
Better to have a system where you can buy at the price you comfortable with and protect your capital.
this way at least you know next year you have more capital than the year before

most people too focus on winning and capital gain and lose sight of protecting capital.
protect your capital should be just as important or more so.

You have a better chance given proper research but it still boil down to luck and probability.
because if it is a science where lot of people can do this, you can be really rich..
 

Could someone else look at the same chart differently with Elliot Wave though and come to a different conclusion?

Did Elliot Wave practitioners claim that it's warning of a disaster or is it claiming the market is going down anyway even if the GFC did not happen? I think the market moves in waves, I am just not so sure it moves in Elliot Waves. If this were the case, do Elliot Wave practitioners get it wrong since they made a mistake in analysis or because the method is not 100% accurate?
 
Caveroute said:
These are epoch changing events, in 'geologic time', I thought we were talking day to day ..........
Click to expand...

All IMO. Cleverer traders/analysts may disagree. I don't mind being a dumb but profitable trader.

Day-to-day: not predictable. Offers up a low risk entry opportunity by virtue of the close stop possible, but the results are more down to the close stop and letting the winner run than to the possibility of correct prediction. 50% correct is plenty good enough to make a fine profit.
 
Valued said:
Just because you think it's luck does not mean it can't be done.
Click to expand...

I don't think it cant be done consistently, i know it cant be done consistently.

Can it be done at all is a different question with a different answer, i have done it myself 3 or 4 times so yes i know it can be done and i know it was pure luck...buy a falling stock and if it stops falling your lucky not skilled or in possession of the magic formula etc.
 

I think the problem you might be having is definitions. I don't think Tech/A means picking stocks as they are falling in anticipation of it bottoming out. I think he means picking bottoms once it has bottomed out. If it's still in a downtrend and falling, we can't have a market bottom. Entering a stock as it is falling is therefore just luck if it happens to bottom out. There has to be a pause in the downtrend through a trading range or some sort of consolidation. It is then you pick the market bottom or make up your mind that the downtrend will continue. Of course, then the point I was making was that even if you get this right, it might be stuck in a trading range months or even years.
 

Agree 100% with the above .... I posted an answer a couple of days ago but deleted the post when I noticed you had put this thread in the medium/long term investing thread.

Firstly, my disclaimer ...... I am the worlds worst trader, so take my opinion with a grain of salt (If anyone wants to know why I am the worlds worst trader just PM me and I'll tell you how to lose money lol)

Anyway, your question Tech is more of an observation from someone who has been in the game for a while (in my opinion) .......

Whenever anyone takes a position, long or short in a Stock, an Index, or a Forex trade, they are taking that position with the view that IN THEIR TIME FRAME , they are picking the top or bottom of the current move ...... (Exceptions to that opinion is if the trader is taking a "part position" ie. Scaling into a position as a longer term plan)

If you are not scaling into a position, then taking a trade (if you are not convinced it is a top or bottom ... in the time frame you are trading ..... is a LARGE mistake!

Without going into boring details, picking tops or bottoms (in whatever time frame a trader is trading in), is possibly the most important "ability" that a trader needs to possess .......... in my very VERY humble opinion

My assessment of trading after many years of ups and downs ...... Money may be the root of all evil ...... but TIME/TIME FRAME is the route to all Money ... Learn the relationship of time to whatever market you choose to trade, and the whole concept of trading will become much clearer ......

Bear in mind I may be delusional lol
 

Have you thought about applying the Coppock Curve to large cap stocks?

Cheers
 
odds-on said:
Have you thought about applying the Coppock Curve to large cap stocks?

Cheers
Click to expand...

From wikipedia:

"He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.[2]"

Sounds like the same people who think the markets are like gravity. This is a faulty analogy and a logical fallacy. You can't base buying and selling signals on the assumption that markets mourn like people. Further it assumes that the Bishop, likely unqualified, was actually correct.

I think it's important to understand just how faith based Americans are. They take faith based principles and run with them. People then start believing in things without understanding the underlying assumptions. Trading based on what a Bishop says is the time people mourn isn't really a watertight strategy. It's just another oscillator based on a longer time frame on the advice of a Bishop.
 

Markets are made up of humans. The time frame of around 12 months seems about right. Out of boredom, one day I applied the Coppock Curve to interest rate data, when applied with the Coppock Curve for the market, you would end up with a reasonable buy indicator.
 

They are sort of made up of humans and sort of not. Let's ignore the fact that people still arn't going to mourn the fall of a market like they would a dead relative, the market is made up of retail traders and professional operators. The latter are hedge funds, prop firms, banks, superannuation funds and other very large professional operators. These professional operators cause the large majority of market activity. They do not mourn a fall in the markets. Further, many entities now use system based trading and high frequency trading. These are run by emotionless computers. The computers are doing the trading. If a professional operator does not want the market to go down, they buy all floating supply of the stock and then the market is unable to move down since there is no more stock left to sell.
 

Perhaps we should define bottom, in my experience most bottoms are V shaped and there was little if any consolidation...every time i have bought a bottom i have bought a falling stock, if its going up its not a bottom.
 
So_Cynical said:
Perhaps we should define bottom, in my experience most bottoms are V shaped and there was little if any consolidation...every time i have bought a bottom i have bought a falling stock, if its going up its not a bottom.
Click to expand...

Well I think you might be misinterpreting what a bottom is. A bottom must occur at the end of a downtrend. You must look to the left and see the downtrend. If it isn't there, it's not a bottom. After a downtrend a stock would almost never form a V shape. There would be a period of panic and mass selling followed by a trading range of buying. The trading range that gets created after the downtrend is the bottom in a lot of cases, but in weaker markets it could be followed by more selling. It will fluctuate and go up and down within the range but that's the bottom. To be honest, identifying bottoms isn't the hardest part, the hardest part is determining when the market will move up from that bottom. You could buy in a trading range after a downtrend but the stock might not make any real progress for a year. Professionals may withdraw their support for the stock and it will go down anyway. Almost no one can tell when this is or is not the case (not to say it can't be done, just almost no one knows how), which is why it's generally seen as risky to trade trading ranges. This is why most people who directionally trade individual stocks don't swing trade the trading ranges. It can be done, but often there are easier trades to use your trading capital on.

If you were day trading I would understand your bottoms are actually more like V shapes since they happen so fast. That being said, on an intra day scale there still will be consolidation, it's just going to be short consolidation. You long term invest though so you should see the downtrend and the resultant trading range which signifies a potential bottom. Whether it's really a bottom will depend on many factors though which is what makes identifying bottoms so hard. I think buying falling markets is a mistake. If it's falling there is no way it can be a bottom!
 

I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
~
 

Attachments

  • NEwbpt2012edit.JPG
    68.3 KB · Views: 137
So_Cynical said:
I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
~
Click to expand...

I opened the chart in Amibroker to take a look at the chart so I could go further back to see what happened. That's consolidation for about two months! It's a V shape, sure, but it's not as if the stock came down and then went immediately back up.

I would say that picking the bottom on that stock at that particular time using the daily chart would be hard. It's ranging within a trend channel. It's pretty difficult to know if the downtrend is paused or if it's going to keep ranging. A clue though is that the stock was unable to make a new lower low but I say that with hind sight. Interestingly, that stock entered a large trading range and has remained there ever since. It's in no particular trend for the last two years.

The idea isn't to pick the bottoms and tops of all markets in all time frames 100% of the time. If in doubt, it's best not to trade the stock.
 
So_Cynical said:
I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
~
Click to expand...

Actually v bottoms are not that common and the chart you've shown is in the process of bottoming. Most bottoms and tops are complex and not as simple as a v bottom/top. There is almost always another test of the high or low...
 
So_Cynical said:
I'm reasonably certain i know what a bottom is, V bottoms are very common, here's a chart i posted in the BPT thread 2 years ago, first bottom is a V and the next 2 are more broad mouthed but still V's...edited in blue to show the V's
~
Click to expand...


CanOz said:
Actually v bottoms are not that common and the chart you've shown is in the process of bottoming. Most bottoms and tops are complex and not as simple as a v bottom/top. There is almost always another test of the high or low...
Click to expand...

With respect So_Cynical is correct, in my opinion.

The difference in perspective between your interpretation/applications appears to be your approaches to trading and investing. A long term investor would probably not enter the trade until the chart showed definite upward movement, possibly after a double bottom or higher low.
A trader with a shorter term perspective would be looking for bottoms & tops within a trading range, whether it was interday, a few days/weeks or a couple of months. This trader would have done their research on the share and have an understanding as to what drives that share up or down and when would likely be a low risk entry point. This trader doesn't have to get the bottom or top perfectly but only needs to get an entry that is low enough to combine with a exit that achieves a positive trade outcome. This trader is also likely to add to the trade if it dips further after the initial entry (scaling?) depending on their level of confidence and determination of risk.
 

I don't think this is the case. I think most traders tend to breakout trade, swing trade established trends or at least the first pullback on a new trend, or trend trade. I don't think many are swing trading the trading ranges. In my opinion the bottom is a trading range almost always in big stocks (small volatile stocks like speculative mining companies play by different rules). It's not picking the absolute bottom, it's picking the trading range that is the bottom. It's a "range" not a particular price. That's a longer term perspective. You add the stock to your watchlist and come back to it later.

Getting a risk/reward ratio more than 1:2 is hard in an ordinary consolidation after a downtrend. There will normally be certain indicators of a preliminary bottom (I don't want to talk about what, it may sound like advice), a test of the preliminary bottom and then after that the bottom is established. The further the trading range progresses, the more dangerous it becomes. It often will start to perform the triangle pattern (which is a symptom of supply and demand, the pattern is just some way people like to define it - but it often leads them to error in my opinion). If you do it at the start though you're buying on the preliminary bottom to take advantage of the inevitable rally that will follow. That rally will come crashing down to test that bottom and then most people get in trouble... they enter on the test without knowing if it carved out a bottom or not. They enter, then perhaps the stock comes up a little, and goes back down even below the preliminary bottom... then some people as you say buy more then they end up having more capital tied into a trading range that may or may not actually be the bottom. I don't think averaging down is a good reason since it often means you made a mistake if you had to do it.

I think most traders average up, not down. You can only average up in an established trend though. I know of no way you can pyramid in a trading range (unless it was a huge trading range spanning years, so much so that one leg of it is really a new bull trend and the leg down is a new bear trend).
 
You must log in or register to reply here.

Similar threads

Sector and microsector tops and bottoms
Replies
9
Views
1K
frugal.rock
Competency and trying to maintain standards
2
Replies
27
Views
3K
sptrawler
R
21 Lessons in Investing
Replies
6
Views
3K
divs4ever
All trading needs to cease for 14 days prior to Monday open in Sydney
2 3 4
Replies
75
Views
11K
divs4ever
R
What Kind of Buckets Do You Have?
Replies
1
Views
2K
luutzu
Menu
Log in
Register
Cookies are required to use this site. You must accept them to continue using the site. Learn more...