26 Aug Breakouts Dominate in Chaos (Step 4)
Breakouts Dominate in Chaos (Step 4)
Aug. 26, 2020
We recently started a journey to beat the market. We want a system that will vastly outperform the market over time and build that system step-by-step so anyone can follow along. Feel free to ask questions as we go.
To review, here’s what we’ve done with our Breakout system so far:
- We introduced the greatest trading methodology of all time;
- We talked about how no one wants to trade this methodology;
- We learned the details of the system.
Now let’s dig deeper into the details.
Here’s what breakout trades look like:
There’s a lot going on.
First, on the left, we see a winning trade on the ES futures contract. Price broke out above the 40-day high and we didn’t exit until it retraced down below the low of the past 20 bars. That trade made $9156 if you traded 1 contract.
Then, the pandemic hit and we entered below the low of the past 40 bars. That worked nicely and we got out on a retracement back above the 20-day high for a $20,331 gain.
Finally, despite the nonsensical nature of the market, the system went long on May 19 on a break above the past 40 days and is still long. That trade is currently hypothetically up $22,000.
That’s a ton of money this year. This system is awesome!
If you traded the ES like we did above, and also added a few other instruments, you could hypothetically be up 226% this year:
On a $31,283 account, you would have hypothetically made $70,760 in 2020.
In chaos (or times when the markets are moving), you can see the power of this methodology.
So what’s the trouble?
The markets don’t always act like that.
Take a look at this portfolio going back to 2014:
Two big things stand out.
In this randomly accumulated portfolio, everything doesn’t win. Since 2014, NK, GC, JY, and TY are all negative. They made no money overall.
Further, there are three losing years. Who could make it through that?
On one hand, this methodology has DOUBLED THE MARKET since 2014. On the other hand, it has three losing years.
Do you see why it’s so hard to trade?
Breakouts have incredible years and produce more money than just about anything.
But you have to make it through the lean times to get that massive payoff.
Looking at this portfolio leads us to the obvious question: why are we trading losers?
And it’s a contentious debate that’s been raging for decades.
We’ll get into it in our next email.
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It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.
HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.