What Is A Follow Through Day And Why Is It So Important?

I have been a professional growth stock investor/trader for more than 25 years.

In this time it has become abundantly clear that there are some very simple yet extremely important rules and techniques that must be followed in order to achieve consistent success in the stock market over time. 

However, there is one in particular that stands out above all the rest.

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It is called the follow through day concept. This is a very specific technique for determining the direction of the general market trend by looking for a “follow through day” to occur.

It was created by Wlliam J. (Bill) O’Neil, founder of the CANSLIM Methodology, Investor’s Business Daily, and author of the best selling book “How to Make Money in Stocks.” 

One of the key tenets of the book is that 3 out of 4 stocks follow the direction of the general market . When I used to travel around the country teaching the workshops with Bill, I would often hear him say that, “getting the direction of the general market correct is more than half the ballgame.” Baseball analogies were definitely his favorite!

Basically, this meant that regardless of anything else, if you misjudged the overall trend of the market, your hard work would not matter and your efforts might go to waste. 

Now that we are clear about why the market’s trend is so important, let’s discuss follow through days in detail.

Its most basic definition is as follows: beginning on the fourth day of an attempted rally on either the NASDAQ or S&P 500, the market must rally powerfully, or “follow-through” to the upside by rising at least 1.70% on heavier volume than the previous day.

In rare instances, a follow through day can occur on day three of a rally attempt if volume is unquestionably overwhelming and top-tier leaders are breaking out of constructive bases on big volume.

A follow through day can also happen further out than seven days. However, between four and seven days is ideal. 

Keep in mind that while every major uptrend or bull cycle in history was preceded by a follow-through day, not every follow-through day leads to a new bull market.

Also, if an index falls below the absolute low of an attempted rally, it is no longer valid.

Failed follow through days happen. The key difference between the ones that succeed and those that fail almost always comes down to how healthy and broad the market’s leadership is.

Assessing the health and breadth of the market’s leadership is largely a qualitative process. Or, to put it another way, it is much more of an art than a science.

Hence, people’s opinions will differ. Fortunately, with a little time, practice, and patience, anyone can learn to tell the difference between the ones that will work versus the ones that won’t. This is a skill developed over time, like learning to paint or play an instrument.

Key Follow Through Day Statistics

  • Distribution on Days 1 or 2 after a FTD fails 95% of the time.
  • Distribution on Day 3 after a FTD fails 70% of the time.
  • Distribution on Days 4 or 5 after a FTD fails 30% of the time.

At the end of the day, the follow through day concept gives you the ability to time and determine the direction of the general market which has enormous benefits both to your trading process and the quality of your personal life.

About The Author
Ross Haber

Ross Haber

Mentored by the founder of CANSLIM Ross Haber leverages years of experience identifying winning stocks and is well versed in recognizing the ones that outperform the general market. He now brings this experience to help you identify these stocks in each Top 10 Report.

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