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AllDayFaders Profile picture
AllDayFaders
@team3dstocks
Technicals tell me WHEN to slam the bid. Fundamentals tell me how hard. DMs are open. #BearTipOfTheDay for FAQs. NOT a licensed professional.Tweets are opinions

Jan 2, 2021, 8 tweets

#ADFPopQuiz Time !!

EVERY single stock trading strategy falls into 3 categories:

Breakout - stock breaks out of a range

Continuation - stock resumes a move after a post-breakout pullback

Reversal - stock reverses due to overextension

Which of the 3 has the highest win rate?

by the way here's a visual representation of each, for my fellow "iM a viSuAL lEaRnEr" motherfuckers.

Answer Time !!

Based on all the research done on Technical analysis in the last few decades (also confirmed by my own data tracking on LFs and LCs), the correct answer is C.

Reversal strategies have by far the highest win rate out of the 3, but at the expense of risk/reward.

But as mentioned several times before, the lower RR doesnt really matter as long as the win rate is high enough . All that matters is the "Trading Expectancy" (high win rate and low RR yields the same expectancy as low winrate & high RR). So it's all up to personal preference.

The reason reversal strategies have such a high win rate is simply due to profit taking once a stock gets too overextended (forces mean reversion).

The RR is low is b/c u have to scale into reversal setups (cant go in full size all at once), which widens ur risk & hurts the RR.

The setups with the lowest winrate are Breakouts (due to fakeouts), BUT they make up for it by yielding the highest risk/reward out of the 3 strategies. Meaning when they work, they work BIGLY

Continuation setups fall right in the middle of the 3 as far as winrate & risk/reward.

So conclusion, all 3 strategies have their pros & cons. Focus on the ones that align better with ur personality & profile.

If u are impatient, love action & cant stand being wrong, trade reversals.

If u dont mind stopping out a few times to nail the BIG move, trade breakouts

If u want a mixture of both, trade Continuations.

Either way, if u're struggling with consistency, master ONE strategy first. I say it time and time again but it bares repeating. Dont trade all 3 unless u've mastered at LEAST one of them. FOCUS & specialize.

#BearTipOfTheDay

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