Breakout Trader - Discretionary


  • +23,7 %
    seit 19.05.2017
  • -1,9 %
    1 Jahr
  • +6,3 %
    Ø-Performance pro Jahr
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  • -17,0 %
    Max Verlust (bisher)
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- trend following approach, in the broadest sense
- screening for high momentum assets - indexes, stocks, commodities, currencies, and others
- a long position shall be entered as the underlying shows a breakout through a major resistance within an accelerating and existing up trend
- a short position shall be entered as the underlying shows a breakout through a major support within an accelerating and existing down trend
- Risk and money management and strict stop loss rules shall be applied. Generally, no more than 3-5% of total assets shall be at risk per trade.
- there shall be further provisions to ensure successive losing trades will not erode trading capital to a significant extent within a short time frame
- exit from a position shall occur only through stop loss or trailing stop loss - there shall be no take profit target, the strategy shall hold on to successful positions
-hence the holding period could last from intraday to virtually unlimited
-the strategy shall seek to achieve:
x low correlation to equity markets through a broad investment universe that can be traded both long and short
x superior risk-adjusted returns

-risk control shall be strict, with the loss budget per trade normally not exceeding 5pct of total assets. If two or more trades are live at the same time, the total loss budget shall depend on the correlation of the underlying assets but shall not exceed 12pct.
-portfolio drawdowns should still be expected to be large and prolonged at times, because there are no profit targets and trailing stop loss limits shall be adjusted only with considerable lag to allow for the breakouts to materialise. I.e. it would not be unusual for a trade to reach and exceed 20 or 30pct in profits before the original stop loss is adjusted to a higher level. This depends to a large extent on the structure of the move. Fast price appreciations without "taking a breath" will be more prone to such situations.
-this is part and parcel of the strategy, that seeks assets that are breaking out of and accelerating already established trends.
-Example for illustration purposes only. Assume the total portfolio value is 1,000 units. A stock trades at 20 units and has broken through a major resistance. A sensible stop loss level is determined at 18 units. The loss budget for the trade is 2pct, i.e. 20 units. The strategy could buy 10 stocks. The portfolio risk would now be 20 units, or 2pct. Assume the stock shoots up to 25 units without taking a break. The total portfolio value would now be 1,050 units. Assume the stop loss limit has not been adjusted, i.e. it remains at 18 units. This means the portfolio could fall back to 980 units. This would be a risk of nearly 7pct.
-the above example shall by no means illustrate a worst case scenario
-the focus on risk control hence shall not mean low risk, but shall mean that the risk shall be strictly managed in a naturally volatile strategy.
-due to the naturally high volatility of this strategy, the initial risk budget per trade shall be small. Supposedly uncorrelated trades still shall count in full towards the total risk budget, as such relationships are not guaranteed to hold all the time and tend to collapse from time to time.
-in a nutshell, the strategy shall utilise high momentum, highly risky assets but shall seek to control portfolio risk through small exposure
-More losing trades than winning trades shall be expected, but the strategy shall seek that winning trades exceed losing trades in size
-a useful comparison to roulette would be that the system shall place small inside bets, rather than large outside bets.

-entry points shall be considered when an asset is moving in an established trend and has managed to recently accelerate this trend. I.e. a breakout of an upward trend to the upside shall be bought, and a breakout to the downside of a downward trend shall be sold. Trend reversals, i.e. a breakout to the upside in a downward trend and vice versa, or breakouts from what can be interpreted as range bound markets, shall not normally be traded. Neither shall established trends that show no clear signs of acceleration. Exceptions might occur where over a longer period of time, no other suitable investment opportunities can be identified.
-Stop loss limits shall always be adhered to. Trailing stop loss limits shall be adjusted according to market movements, i.e. taking into account volatility and other aspects like support or resistance levels

-the strategy shall be discretionary but with significant rules based influences (SL, entry, exit, etc)
-the identification of potential investment opportunities across the eligible universe is a discrete process and not automated
-the decision in favor of one trade and against another is a discrete one and shall not be subject to a mathematical or similar rule
-it shall utilise, among others, Donchian Channels, traditional technical analysis, moving averages, etc
-style influences stem from the Turtle Traders (in particular the high tolerance to a buildup of large book profits without locking them in, resulting in potentially large drawdowns), Alexander Elder, Bennett A. McDowell (ART), and various books on technical trading strategies, notably
1. Fortune's Formula (Poundstone),
2. A Trader's Money Management System: How to Ensure Profit and Avoid the Risk of Ruin (McDowell),
3. Beyond Technical Analysis. How to Develop and Implement a Winning Trading System (Chande),
4. Money Management Strategies for Futures Traders (Balsara),
5. Entries and Exits: Visits to Sixteen Trading Rooms (Elder)

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Mitglied seit 19.05.2017


  • Technische Analyse