In some trading books and articles you can read that a high trading volume on a breakout of a trendline increases the odds. In other words, the high volume confirms the set-up. But is it really true?
I decided to test the double bottom chart pattern for three cases: (i) no requirement on the breakout volume; (ii) on the breakout day the volume was greater than 1.0 times the average volume of the past 14 days; (iii) on the breakout day the volume was greater than 1.5 time the average volume of the past 14 days.
The results for the stocks from S&P 500 index appear in the table below:
|No requirement||Factor > 1.0||Factor > 1.5|
|Number of trades||943||561||121|
|Average time in market||33 days||33 days||33 days|
The results are surprising: the high volume on the breakout day will not improve your trading. Well, the only parameter that improves is the maximum drawdown but not significantly.