Hi everyone,
I’m a software engineer with a passion for finance and statistics, and I’m currently working on a small personal project. I’d like to get some feedback from the community to understand how valuable this approach could be in real trading/investing.
In short: I’m analyzing all the significant single‑day drops of a stock (e.g., -6%, -7%, -10%) and measuring how the price behaved in the following days and months.
The goal is to understand whether there are recurring patterns that could help evaluate an entry after a sharp decline.
What I’m analyzing exactly
For each historical drop, I calculate:
- Subsequent rebounds (1, 2, 5, 10, 20, 60, 90, 120, 180, 300 days)
- Probability of a rebound for each time horizon
- Recovery time (how many days it takes to return to the pre‑drop price)
- VolumeShock → how abnormal the day’s volume is compared to the average
- CyclePos → where the price sits within the yearly cycle (near the lows or near the highs?)
- DropQualityScore → a 0–100 score summarizing drop quality (intensity + volume + context)
The basic idea behind this is simple:
not all drops are the same.
- A -8% drop with low volume is just noise.
- A -8% drop with 5× average volume is panic.
- A -8% drop near yearly highs is often an overreaction.
- A -8% drop near yearly lows is riskier but can produce strong rebounds.
I’m trying to understand whether these historical patterns can help:
- identify “high‑quality” drops
- estimate rebound probabilities
I started from a real case: the recent FinecoBank drop (-9%).
I analyzed the stock’s historical data over the last 10 years.
Then I extracted only the days where the stock fell more than 6% during the period.
From there, case by case, I analyzed what would have happened if we had opened a position at the end of the drop day (during the maximum intraday decline):
What do you think?
Does it make sense to use this kind of historical analysis to evaluate entries on sharp drops?
Has anyone here tried something similar?
Are rebound patterns after large drops stable enough to be exploited?
Any metrics you would add?
I’m really curious to hear opinions, criticism, ideas, or suggestions.
Analyzing historical drops: is it actually reliable?
byu/Season_Famous inwallstreetbets
Posted by Season_Famous
9 Comments
[deleted]
My Wendy’s dumpster is getting closed just tell me calls or puts damn
I prefer lines in crayon on chart, not whatever this is.
Tbh I think the primary issue would be making anything actionable without using a more advanced system that analyze context. That’s what the most advance automated systems like Alladin already do.
Price means nothing without knowing the underlying factors. Could you find some actionable patterns? Potentially. Are you going to build a system that can predict a good investment on price action alone? Highly unlikely.
Ive seen similar tools and algo trade platforms come and go and in my experience all it takes is one outlier event to totally wreck your strategy. Thats why back testing by itself is not seen as a reliable way to show effectiveness.
I think market paradigms change a lot, usually every 10 years at least and static strategies based on price data or algos always get cooked as they can’t reliably adapt to changing market forces. My advice is to see if you can use it to help you trade but don’t expect to create something that can make any investment decisions for you.
>Has anyone here tried something similar?
Yes. [Renaissance Technologies](https://en.wikipedia.org/wiki/Renaissance_Technologies) has done something similar.
In general you have to have big balls and endless pockets for this to work. Do you have enough money to gobble up shit that just keeps dipping? How do you know the company is not going to hell in a hand basket after it drops 10%?
Where did you get the data
It’s interesting to think about but I think if you keep adding parameters it just goes back to being, well the outcomes differ on a case by case basis… which is probably true but not very helpful. You’d likely need to restrict the time window of cases you look at and try to apply it to a different time window to see if it holds up or if you are just reading signal in noise.
I’d highly suspect you would not find anything terribly useful, since if there was a reliable way to predict stock movement the next day based on the prior day, gotta think them wall street types would have started using it a while ago, after which it no longer becomes useful.
So you’re saying buy and hold after a big drop? You’re saying stocks, so wrong forum. Most regards here play 0DTE options and lose money.
bruh i aint reading all that shit. I cant even understand what you wrote beside first sentence.
just give tldr calls puts long short