The Wild 5M Breakout Strategy on the Dow

The Wild 5M Breakout Strategy on the Dow

Feb. 23, 2024

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In our last Newsletter, we looked at a breakout strategy on the Nasdaq even though breakout strategies aren’t supposed to work on indexes.

And it hypothetically beat the market by a mile since 2007.

Would this strategy work on another index, one that’s known to be a very slow mover?

Let’s find out.

We’ll use the YM.D Futures contract this time, which is the Dow E-Mini during regular trading hours (not 24 hours). Trading costs are built in, as always, and we’ll trade 1 contract each time.

YM.D 5M RSI Breakout

  • Long Only Entry: When price closes into RSI Overbought (Length 12, Overbought 80)
  • Target: $1,000
  • Stop: $700

You’d think we’d have to change the target and stop for the Dow because the Nasdaq moves so much more. But we didn’t.

Here’s a recent trade:

 

And here’s the Equity Curve on a sample $15k account since 2007 via Portfolio Architect:

 

As expected, it’s not as dynamic as the NQ but it does show that the concept has robustness. We didn’t change the parameters and still produced a nice amount of profit that matched the market.

Let’s now combine the two since 2007 and see what we get:

 

Using a $29k account (which would cover the margin required to trade both at the same time), we would almost double the market’s return over the same period.

With no compounding (which would create far more profit).

Not bad for a strategy that isn’t supposed to be very good.

Talk to you soon.

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Disclaimer:
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.