Q. Why percentile-based bands instead of fixed % like NASDAQ/KOSPI?
Because stocks differ in typical volatility. Applying a fixed -25% to every stock is too extreme for normally-stable stocks and too lenient for normally-volatile ones. Using each stock's own historical distribution reduces this distortion.
Q. Why only the last 3 years of data?
Volatility regimes from 10 years ago may not match today. Including too much old data lets outdated patterns keep influencing the bands even after a company's character has changed, so we cap it at 3 years for more relevant bands. The displayed drawdown figure itself is still calculated accurately from the full historical peak.
Q. How should I interpret the historical event-based statistics?
We find past periods when the stock entered a given band (merging consecutive days into one event), then check whether returns 3/6/12 months later beat the benchmark index (KOSPI/KOSDAQ or NASDAQ100/S&P500). With fewer than 5 events, treat the result as reference only.
Q. Does this indicator work equally well for every stock and sector?
This indicator fundamentally rests on a mean-reversion premise — that a stock temporarily oversold tends to revert toward its trend. It therefore tends to work particularly well for cyclical industries with step-pattern rallies and corrections driven by supply-demand cycles, such as semiconductors, chemicals, shipbuilding, or shipping. Conversely, when a company's fundamentals, competitive position within its value chain, or valuation itself have deteriorated structurally — for instance amid technological substitution, permanent share loss, or an ongoing valuation de-rating — there is no guarantee that past drawdown-and-recovery patterns will repeat. In such regimes, a buy-the-dip strategy risks falling into a so-called "value trap." Use this indicator strictly as a statistical reference, and always cross-check whether the company's underlying fundamentals have genuinely changed.