Find the stocks that have already moved the most. Wait for one to rest in a tight, orderly base on top of its 10 and 20-day
averages. On the day it breaks out, buy the opening range high with the stop at the low of the day, sell a third after three to five
days, and ride the rest until it closes under the 10-day.
3setups: breakout, EP, parabolic short
0.5%risk per trade, 1% at most
25–30%win rate he reports
6 / 6
Watch one breakout, start to finish
1
Find the leaders
Scan for the top 1 to 2% of all stocks by gain over the past one, three and six months. Breakouts come from stocks that have already moved.
Look for a big prior move: 30% to 100% or more in a few weeks to a few months, on rising volume.
It has to move enough to be worth it: a big average daily range (ADR), and enough dollar volume to get in and out.
Momentum stocks keep moving. The strongest names in the strongest groups are where the biggest swings come from.
2
Let it build a base
After the move, it pulls back and goes sideways, usually for two weeks to two months.
The 10 and 20-day averages catch up and price "surfs" on top of them. A base that slices through them is sloppy.
The tighter the base, the closer the stop can sit, and the bigger the next move is compared with the risk.
3
Buy the opening range high
On the day it breaks out of the base, mark the opening range: the first 1, 5 or 60-minute bar.
Buy as price takes out the opening range high. A longer range (60 minutes) is slower but more confirmed.
Breakout day volume should be big. A breakout on light volume is a warning.
He always buys strength, not dips. The opening range high is the first proof that the breakout is real today.
4
Stop at the low of the day
The stop goes at the low of the day. No widening it, no tightening it.
If the low of the day is further from the entry than the stock's average daily range, skip the trade.
Size it so the stop costs about 0.5% of the account, and never more than 1%.
Most breakouts fail. A small, fixed loss on each one is what lets you keep taking them until one runs.
5
Sell a third after 3 to 5 days
If it works, it usually works fast. After three to five days, sell a third to a half of the position into strength.
Move the stop on the rest up to breakeven.
If it goes nowhere for a few days, that's information too.
Banking a piece early pays for the losers and turns the rest into a free trade.
6
Trail the rest on the 10 or 20-day
Hold the rest until the first daily close below the moving average. A close, not an intraday dip.
Faster, more extended stocks get the 10-day. Slower ones get the 20-day and more room.
No price targets. The trend decides when you're out.
This is where the money is made. A few trades that run for weeks pay for all the small losses.
The three things he scans for
Before a chart goes on the watchlist, it needs all three.
Relative strength
Top 1 to 2% of stocks over one, three and six months. The leaders, not the laggards catching up.
An orderly base
Higher lows, tighter ranges, quiet volume, price riding the 10 and 20-day averages.
Range and liquidity
A big ADR so a breakout can travel, and enough volume to trade the size you need.
What kills it
Any one of these and there's no trade, or a smaller one.
A bad market
Breakouts and episodic pivots need a rising market. When the index loses its 10 and 20-day, most breakouts fail.
Index 10-day under the 20-day: cut back or sit out.
The stop is too far
When the low of the day is more than an ADR from your entry, the risk is too big for the setup.
Low of day past one ADR: skip it.
A sloppy base
Wide swings, lower lows, closes all over the averages. There's no tight spot to put a stop.
No higher lows: not ready.
Chasing
Already up more than its ADR on the day by the time you see it. The risk to the low of the day is too big.
Missed the ORH: wait for the next setup.
The market comes first
He reads the index (the Nasdaq) with the same two averages he uses on stocks. Two of his three setups only work when the market is going up.
By his own estimate, the filter keeps him out of most bad markets and in most good ones.
Green
10-day over the 20-day, both rising
Breakouts and episodic pivots work. Trade full size, and add exposure as the trades work.
Caution
The 10-day crosses under the 20-day
Breakouts start failing. Take fewer, smaller trades and tighten up on what you hold.
Red
Under both, and they're falling
Mostly cash. The parabolic short is the only setup that doesn't care which way the market is going.
Size it: the stop decides the shares
The risk is fixed in dollars, so the share count comes from the distance to the low of the day. The tighter the base, the bigger the
position. The default numbers are the walkthrough's.
Most of these trades lose
He puts his own win rate at about 25 to 30%. That only works because the losses are small and fixed (the low of the day, half a
percent of the account) and the winners are allowed to run for weeks.
Sell the winners early and the math stops working.
The position can be a big slice of the account (22% in the example) because the stop is close. That's fine as long as the stop is
a real stop. Moving it lower to "give it room" turns a 0.5% loss into a much bigger one.
Ten trades at a 30% win rate
Seven losers, three winners. Some losers are cut for less than a full R, because the stop moved to breakeven after a sale or the
trade went nowhere. One big winner carries the whole run.
The order is made up, and real runs can be much worse: ten, fifteen losers in a row happen in a choppy market. That's
what the 0.5% risk is for.
The other two setups
The breakout is the bread and butter. He also trades two more, with the same entry and stop logic: buy the opening range high with the
stop at the low of the day, or the mirror image for the short.
Both charts are illustrative. He now calls the episodic pivot his main strategy.
10%+
EP: the minimum gap, on news big enough to change how people see the stock (earnings, guidance, a new product).
Huge volume
EP: ideally a stock nobody cared about, sideways for months or years, now trading many times its normal volume.
3–5 days up
Parabolic short: several big green days in a row. Small caps up 300% or more; large caps far less.
Never day one
Parabolic short: rarely day two either. Usually day three or four, on the break of the opening range low.
The three setups, side by side
Same toolkit for all three: a reason the stock should move, an opening range trigger, a stop at the day's extreme, and a moving average to get out.
Breakoutlong, the bread and butter
Episodic pivotlong, news and a gap
Parabolic shortshort, the blow-off
Before
A big move (30–100%+), then a 2-week to 2-month tight base
Neglected: sideways for months or years
Several huge up days in a row, extended far above the averages
The trigger
Breaks out of the base
Gaps up 10%+ on big news and huge volume
Day 3 or 4 of the run starts to crack
Entry
Over the opening range high (1, 5 or 60-minute)
Over the opening range high (5 or 60-minute)
Under the opening range low
Stop
low of day
low of day
high of day
Stop check
No further than one average daily range from the entry, or skip the trade
First sale
A third to a half after 3 to 5 days, stop to breakeven
Cover into the drop
The rest
First close under the 10 or 20-day average
Cover at the 10 or 20-day average
Market
Only in a rising market (index 10-day over the 20-day)
Any market
Buy strength. Cut losers fast. Let one run.
The setup is simple; the hard part is the discipline. Most trades get stopped out at the low of the day. The edge is a small loss on
every one of them and the patience to hold the rare winner on the 10-day for weeks.
Only the leaders, only from a tight base, only in a rising market.
Opening range high in, low of the day out, 0.5% at risk.
Sell a third in 3 to 5 days, trail the rest, no targets.
Based on Kristjan Kullamägi's (Qullamaggie) publicly described approach, as summarized in the
Complete Trader's Edge research sheet
and FinancialWisdom's breakout case study.
The walkthrough, the stepper chart, the two setup charts, the ten trades and the calculator's default numbers are illustrative, not a real ticker.