Break outs and downs

In trading strategies, buying breakouts on heavy volume is highlighted as a fundamental approach. This method involves scanning for stocks that display unusual volume levels—typically two or three times the average—aligned with significant price movements while avoiding overbought conditions. The strategy is derived from the well-known Can Slim method, with adaptations prioritizing quicker profit targets. The addition of short selling introduced innovative criteria, focusing on identifying stocks that exhibit substantial breakdowns, often following negative news or earnings surprises. The trading plan typically involves placing initial orders with an attached profit target of five percent and a stop-loss of seven percent, facilitating a turnaround of capital every few days. This approach optimizes trading capacity by continuously allocating resources to active stocks rather than tying them up in long-term holdings. The rationale for shorter holding periods is anchored in the necessity to capitalize on current market movements and trends, ensuring that traders stay engaged with responsive investment strategies despite the historical trading costs faced in earlier years.