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Do you like buying new highs?

Posted by Satuki On April - 7 - 2010

Do you think that buying new highs works?  I heard both good and positive answers from other traders. When I back test a theory(system), I tend to spend most of my time looking for holes.  Look at the chart below.

 

Every time you buy a new high such as A,B and C, you would meet a bad reaction immediately. Those reactions were big enough to knock out most stop losses placed by short term swing traders.  If you took all the trades at A,B and C, your confidence in trading POT would be severely shaken.

 

Click on the image to have a better view

 

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Most Commented Posts

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  • Wannabee

    I never buy new highs. Always wait for the pullback from the long termers taking profits.

  • jeff

    It would really depend on the volume on how it broke out. I would consider buying 25-50% when it breaks out and remaining, when it pulls back to what was previous resistance(which should now be support).

  • TA

    You need to have a decent chart setup to base it upon. Since the SPY doesn't count as a momo stock, you won't see the kind of setups needed to sustain new highs. Look at EOG, PCLN or CREE for an example.

  • http://sites.google.com/site/marketrulertrading/ George Richards

    Satuki, Could you please explain the subject of buying new highs.
    To my way of thinking a new high is the break of a previous significant pivot point.
    Going long or short on the break of that pivot.
    Note CREE; on 1/20/10 the stock gaped up about 5 points, adding another 4 points or so by the end the day to $63.95, it then Rev. and dropped for approx 10 days to a low of $54.46 on 02/05/10. On 02/08/10 it Rev. to the upside, breaking the previous pivot of $63.95 in 7 days. Over the next month or so CREE added approx $19.00 from the break of the high that was made on 04/15/10

    Thank you for your hard work in keeping this very informative website going, I to started a website for beginning and intermediate traders and quickly released the amount of work it takes to keep it going. I'm on hiatus right know but hope to start it up again soon. The profits showen are optimistic, but are all correct if you could manage that many trades. http://sites.google.com/site/marketrulertrading… Click on small gray arrows to open page. If their are any ideas you would like to incorporate into your web site, please feel free.

    Keep up the good work Satuki !

  • http://www.momdaytrader.com/blog/ Satuki (Trader Mom)

    Different traders might have different definitions of new highs depending on their time frames. If your time frame is 30 days, then the 30 day high might be used. But I kind of doubt its effectiveness. I would look at the 30 day as a psychological barrier only

  • George Richards

    Thank You for your reply Satuki,
    Concerning the subject of buying new highs or lows. Movement, dynamics and reversal are what is required for meaningful high and low pivot points. Their are no doubt a multitude of ways to judge high/low break outs, some better than others. Look for a significant move in one direction (say the top pivot point) followed by a reversal (bottom pivot point) then the break of that first pivot point where you would pull the trigger. (lots of pivot points in here : ). A stock can move sideways for short or long periods of time and never put in relevant highs or lows, but stocks many times put in new high/lows in one day and sometimes even less (good earnings, news etc. can make a new high/low in a moment). Break out of new highs or lows are not something that should be avoided, its just another tool in your tool box and when used correctly can be a profitable setup.

  • http://www.momdaytrader.com/blog/ Satuki (Trader Mom)

    I agree with you. It is just that I have not had any luck with buying new highs or shorting new lows.

  • http://www.momdaytrader.com/blog/ Satuki (Trader Mom)

    I agree with you. It is just that I have not had any luck with buying new highs or shorting new lows.

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