📝Study work this weekend: Qullamaggie's tightest stops had the fewest winners. Did his tightest charts?
WHY
"You want tightness before a breakout, not like loose action."
Earlier this week I split the breakout buys he showed on his streams into thirds by how far the stop was under the buy.
Selling on the first close under the 10-day moving average, the tightest third ended with 17% winners. The widest, 28%.
So the tight stop was the worst. This makes sense.
But how important is it to have a tight chart? According to Qullamaggie it's very important.
THE STUDY (2 to 3 hours)
1. Open 30 breakout entries in date order. Not the pretty ones - there are many, trust me.
2. Scroll the chart so the day before the buy is the last candle. Look only at the 10 days up to it. Write down the highest high and the lowest low.
3. Turn that into a range in %, then divide it by the stock's ADR (its average daily range over the 20 days before).
4. Sort the 30 by that number and split them in three: tight, middle, loose. Then scroll forward to the exits and mark the winners.
5. Count the winners in each third. Then look at his stop on each one: were the tight charts also the tight stops?
WHAT I'M AFTER
Two win rates: the tightest third and the loosest. If a tight chart works like a tight stop, the tight charts should come out worst again.