A Simple Breakout Trading System +5,024% (Backed by Data)

What’s this method, and why does it work?


It is a inventory buying and selling system.

Based mostly on tutorial analysis and my backtesting, sturdy shares are prone to proceed within the route of the pattern.

It’s confirmed!

It’s why this method appears to be like to purchase breakouts.

Now I wish to be trustworthy right here…

I’m about to share the buying and selling technique with you isn’t mine initially.

I’ve studied the works of different quantitative merchants like:

  • Andreas Clenow
  • Nick Radge
  • Emilio Tomasini & City Jaekle

I wish to give credit score the place credit score is due.

With that stated…

Let me provide the precise buying and selling guidelines to do that…

Buying and selling guidelines


We’re going to be buying and selling shares within the Russell 1000

Market: Shares within the Russell 1000

These are the biggest 1,000 shares within the U.S. inventory markets.

They’re liquid sufficient for us to enter and exit with relative ease.

Subsequent, we are going to use a easy pattern filter.

Pattern filter: Russell 1000 is above the 100-week shifting common

Why do we’d like a pattern filter, you could ask?

Properly, as a result of we solely wish to be shopping for when the general inventory market is in an uptrend.

We don’t be shopping for when the market is in a recession as a result of this received’t put the chances in our favor.

Easy as that!

Subsequent, entries…

Entry: The inventory value has closed above the 50-week excessive (on the weekly timeframe); Enter on Monday’s open

It is a weekly buying and selling system.

That’s proper; you possibly can commerce the system whereas having a full-time job!

You don’t want to look at the markets all day.

Now as soon as the inventory has closed above the 50-week excessive, you’ll wish to enter that inventory on the market open throughout Mondays.

So, when the market opens on a Monday, you enter the commerce.

Ensure you’re taking notes as a result of that is essential!

Transferring on…

Exit: When the inventory value has closed beneath the 40-week low  

The exit rule is fairly self-explanatory, however I’ll share the way to spot that in a while with you.

Sounds good?

Rating: Shares which have elevated essentially the most in value during the last 50 weeks

Think about this.

There are 1,000 shares within the Index.

If 50 to 100 shares are making 50-week highs, which shares do you decide?

Do you simply put a blindfold and throw a dart on which inventory to purchase?

In fact not!

What we’ll do is we are going to use a inventory filter that ranks the strongest shares during the last 50 weeks.

A inventory filter will assist us filter out the sturdy shares from the not-so-strong shares.

For threat administration, it’s fairly easy.

Threat administration: 5% allocation of capital per inventory with a most of 20 positions

Why a most of 20 positions?

Easy, 5% multiplied by 20 equals 100, which suggests your entire shopping for energy can be used up!

That’s proper; there’s no leverage concerned for this method.

For instance, you’ve a capital of $100,000.

What you’ll do is you allocate $5,000 to every inventory.

However you is perhaps considering:

“Wait a minute, how do I understand how many shares of inventory can I purchase?”

Let me present you.

Simply take $5,000 and divide it with the inventory’s value.

Now, let me offer you a couple of charting examples so you possibly can see how this works

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