Bottom-Up Analysis
Definition
A way of choosing trades that starts with an individual stock and its own reason to move, such as news, earnings or unusual volume, and checks the market and sector only as context.
Example
“His bottom-up scan found XYZ up 8% on earnings before he even looked at the index.”
Detailed Explanation
A bottom-up day trader scans for stocks already in play: names up or down sharply on a catalyst, trading at several times their usual volume. The stock's own story comes first, and the broad market is a filter rather than the starting point. Bottom-up suits momentum, gap and news traders, especially in small caps, which often move on company-specific news regardless of the index. Its risk is ignoring a strong market tide, since even a stock with good news can be dragged down on a heavy selling day. Many traders find candidates bottom-up, then use a quick top-down check to decide whether to trade them at full size, smaller size or not at all.
Go Deeper
Related Terms