This week's lesson.
Today I want to cover what finding a pattern in 2021 is like after having such a volatile previous year.
When it comes to intra-day trading, we look for stocks worth the trade and that remain consistent. To find the consistency of a pattern, tracking at least 150 samples can give you the average winning percentage of that specific action. However, patterns need at least two years to form that consistency and have at least a 15% reward to be considered a pattern.
Because of how 2020 played out, we have many samples to work with, but we also have many outliers.
Patterns that worked at the beginning of 2020 and didn’t hold consistency throughout the year can’t be used when judging the pattern. I look at my performance over the previous year and ask myself if trading low float stocks are actually profitable. Low float stocks can be dangerous due to a candle’s ability to move 20%, which is why I don’t recommend trading in this zone for beginners; however, it’s still beneficial to understand.
If you want to trade low float stocks, then tracking your pattern for an entire year can give you an idea of whether there's a positive net profit from this specific pattern.
To start 2021
To start 2021, I categorized my patterns into different spreadsheets to begin tracking which patterns performed well, which patterns performed seasonally, and so forth.
Beyond that, I also track the three different sections that breakdown float and separate patterns that work under each section. Low float is designated for stocks with a float from zero to two million; mid float has a range of two million to ten million, and high float is for floats ten million and above. Float isn’t the only factor that needs to be examined when building your spreadsheets. Because every stock is different, you have to categorize your patterns in more detail.