Here is a stock which has gone up around 1500% in last 260 days.That is a significant move.
FRPT,Force Protection Inc (Google Yahoo Earnings Chart)
What is a significant move in a stock. Assuming you are not a high frequency day trader, then you would define significant move as 5% in a day for individual stock. If you add say another criteria of saying the 5% move should be accompanied by volume increase over yesterday. So lets say 5% move on higher volume is significant. The real reason for this is to find out how many stocks make that kind of a move in a day. Supposing 5% of the total universe of stock on a given day has 5% move, is that significant.Does a one day significant move indicate future returns.
Many of the things which I look at on daily basis and monitor is basically a variation of significant moves on various time frames. A 5% move on individual stock on higher volume with a cut off off 100000 plus volume to me is significant move based on past studies of stock price moves. Similarly a move of 2% on any of the Index is significant. Or a move of 2% on a sector is significant. It is more significant if it happens on higher volume.
Taking the same logic further a 50% move in a stock in a month is extremely significant move. It indicates an aberration. A 25% move in a month in a stock is on a significance scale also very significant.A 25% move in a quarter is significant in a market where the average long term drift is less than two digits. Similarly a move of 100% in a year on a stock is a significant move.
Now if you constantly study significant moves and build an iterative model over a period of time you will probably learn a lot about such moves. A brute force backtesting might give you even greater understanding in to such moves. A combination of backtesting and continuous iteration gives you a live model of what makes a stock make a significant move.
Largely my study of significant moves supplemented by additional insights has helped me understand what kind of stocks are likely to make a significant move for a given time frame. There are factors one can isolate which increase probability of a stock making a significant move. That gives you a significant edge in avoiding the bad or low probability trades.
When a stock doubles in a year it is a significant move. You can say as of this particular time this stock is moving at 100% per annum. You might call it is trending but then you will get in to never ending debate about what is trend and why trends do not exist. So to keep it simple let us say a stock when it makes a 100% move it is significant. And before many of you object saying a low price stock doubling is no big deal, OK use your own cutoff of price you like.
So if you do not want to miss a significant move here is a wicked concept. Some of you who might be interested in making significant return might be interested in studying this concept in detail.
How to find a stock which makes 1500% move in a year
If you want to beat the market by significant percent track and trade the significant moves in the market.
- Use any of your favorite stock investing software. This example assumes excel based system.
- Calculate the lowest close for a stock in last 260 days. If a stock has less than 260 days data calculate lowest close for those many days.
- Calculate percent change from lowest close and select stocks which had 100% plus growth
- Find the highest price in the 100% move and only take stocks which are within 25% of that highest price.
- So this is your trading universe of stock which have made significant move of 100% or more and are as of today within 25% of the high during the move
- Use a significant one day move scan on these stocks. e.g. say a 5% move ( 100 * (C - C1) / C1) >= 5 AND V >= 1000 AND V > V1)
- Buy next day with 1% risk and stop below the low of previous two days bar
- Trail with a stop
- If you get stopped buy again on next breakout
- Enjoy your profits
Tips & Warnings:
All major winners in a year appear on this list. If you follow the approach religiously you will never miss a 1500% move, you will miss the first 100 but you can still capture the 1400%. Unless a stock gaps up 1500% in a day!
There is a catch in this, that is why most people would never trade it.
Everyday I will put up the raw data for significant movers in this list, you can pick your stocks from it. Look under "Double Trouble" heading everyday end of day or by next day morning.
Earlier Post: What are significant moves
Coming next: Many ways to trade the significant move concept