Stock Chart Patterns Transcript
1. Title Slide 2. Hello Traders, this is Roger Scott from Market Geeks with another short trading video tutorial for you. Before I begin I want to remind you to subscribe to our channel and don’t forget to visit market geeks for your free swing trading report. 3. There are hundreds of stock chart patterns traders use to enter as well as exit the market. One of the most if not the most popular entry method is the breakout. A few weeks ago I wrote a short article outlining success rates with breakout stock chart patterns. The basis of the article was to show readers how using different time length to determine breakouts could substantially change your success and failure ratio. 4. The test was composed of over 2500 stocks and several other futures, commodities and currency markets. The test proved that increasing the length of your breakout from 20 days to 90 days could increase your odds of success from approximately 30 percent to about 56 percent. 5. To make this simple, the test demonstrated that stocks that remain calm for long periods of time tend to have stronger directional moves that continue in that direction. While markets that remain calm for a short period of time tend to have weaker and less consistent moves in one particular direction after they become active again.
6. Today, I want to show you how you can improve your odds of success even further. The research I presented to you was performed by a computer that was not taking into account what the stock chart looked like prior to analyzing the data. In other words, the computer program was only looking for stocks that were trading at or above their 90 day price high. What the computer was not analyzing was what the stock did immediately prior to making a 90 day price high. 7. Let’s take a look at the following examples. All stocks are making 90 day price highs but the period prior to the breakout look completely different from each other. This stock is clearly trending strongly upwards and breaking above the 90 day price high. Notice how much the stock has already moved up prior to the breakout, there’s barely any trading range. 8. This stock had a fairly wide trading range prior to the breakout. The tighter trading range a stock has the better and more powerful the breakout. This stock has substantially more trading range than the previous example. Always pay attention to what the stock did prior to the breakout.
9. This is a great example of a stock going through a nice tight trading range prior to breaking out. You can see it's still a 90 day breakout; however the stock has been wound up for an extended period of time. Breakouts out of trading tight ranges produce the most powerful and volatile moves in one direction. What you typically want to see is a trading range that lasts anywhere from 45 to 90 days.
10. This is another stock with a trading range that lasts about three months. Always keep in mind that the longer the stock stays calm the better the odds that a meaningful move will occur at some point in the future. 11. My goal in creating this tutorial is to get you to begin looking at breakouts from a different perspective. Many traders think all breakouts are just breakouts and they should be treated equally. What you need to pay attention to is the behavior of the stock prior to the breakout. Remember, the longer stock stays calm the better the odds of a long and meaningful move in one direction. This may sound very basic but you would be amazed at how useful this information can be for traders trading volatility set ups such as breakouts. 12. That’s it for today’s tutorial. Please subscribe to our channel for trading videos and trading tips and don’t forget to visit market geeks for your free swing trading report. Thanks for joining us; this is Roger Scott wishing you the best in your trading.
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