Transcription
This is almost free money in the E- Mini S&P 500 index. Let me explain and let me show you.
Hi, my name is Thomas, also known as the Mr. Breakouts. I'm a breakout trading specialist and an internationally recognized trading author. I've traveled the world trading breakout strategies. And on this channel, I will teach you my own way of finding the right trading opportunities and making real money with breakout trading.
Hello. Hello breakout trading funds and specialists and masters. Hope you had a great week and hope you catch some nice moves in the markets lately and made some good money. And today I'm going to show you really really great opportunity in the E- mini S&P 500 a breakout trading opportunity. But first of all the the way I discovered this opportunity I'm going to share with you is because of the video which I recorded the last week. So please first of all watch the video from the last week where I was talking about E- mini S&P 500 in general and asking the question is this still a good market because everybody is talking about Ein Nasdaq Ein Nasdaq even NASDAQ nowadays but is E- mini S&P still a good market and that's what I covered in the previous episode now let me show you something really exciting so in the previous episode what I also covered was this volatility analysis and you can again you can see in the previous episode and in this volatility analysis I basically uh was curious if we can get some volatility some really high volatility bars on hourly data hourly I mean S&P data more than 3% and actually what happened is that you See what what we saw last week. We saw that the first bar 9 to 8 a.m. is actually producing high volatility. The first bar or two like first bar or two after the opening first bar or two after the opening first bar after or two. So after the opening Friday as well. So every day Monday, Tuesday, Wednesday, Thursday, Friday when the market opens we have overall we have a strong volatility. is something we know already but we can have extremely strong volatility with some incredible incredible movement uh which we which we discovered by setting very high threshold of 3%.
Now what's really exciting after I recorded the video I actually got back and I realized that this movement seem to be on the short side. Have a look green bar means there's lot of opportunity like big big movements on the short side. the first hour on Monday not on Tuesday. On Tuesday, it's quite mixed. On Wednesday, again, it uh it's a little bit mixed, but with strong short bias as well. Thursday, Thursday is definitely short. And Friday seems to be a little bit of both, short and long. But definitely, it's not easy. Just let me explain. It's not easy to find short breakout strategies in indexes. But this really captured my attention. Then you know after the recording I was thinking like there was something that I really really liked about this chart. So I got got back to it and I just isolated short moves. Okay, only short moves and the short moves are actually showing really really strong potential big over 3% movements at the beginning of day every day. So on Monday there can be a very strong short movement. On Tuesday it can be mixed. On Wednesday we can have at the beginning very strong short movement and uh on Thursday and Friday as well.
Now this is not telling us there will be short movements. It's not about the direction. It's about more about volatile movements and we can see that we can have some super super volatile movements more than 3% uh per hour on on nearly every single trading day in Ein S&P on the opening and to me this is bang bang money you know guys like this uh Donald Duck you see the dollar signs this is money this is money. If you know what to do with this, it's money. It's just about finding and spotting these opportunities and transferring them, translating them into money. And I'm going to show you right now how to do this. Uh, by the way, I'm delivering episodes like this one every single week. So, don't forget to to subscribe because you will learn a lot from me on this channel.
Okay, let's go back. So we now know that we can actually expect some occasional not often but occasional huge down movements on the short side the first hour or two hours when the market opens 9 to 10 or 9 to 11. Fantastic. So let's now go uh to a different module and let's actually let's let's actually go to the um strategy builder and let's now this test let's test it and let's do this exact pattern. So we do we just want to enter during the first hour 9 to 10 and the point of initiation. Okay, you might not understand. Okay, so first of all you need to understand uh how we construct breakout strategy. So breakout strategy is a combination of point of initiation that's where we start the breakout from the space calculation which is multiplier by ATR ATR sometime which we just isolated 9 to 10 a.m. and uh sometimes some filter as well. So we're playing here with the breakout trading formula. Now if you need to or if you want to know about the breakout trading formula, please don't forget this is the most thorough material of the on the breakout trading formula ever published. With this ebook, you will become uh trading uh well not master but you'll you'll learn everything about breakout trading very quickly. It works on any market. It works for any time frames. You can really learn how to build powerful breakout strategies or you can also uh download this very simple very brief version for free on the link below. Not as thorough as the book but with lot of information as well.
So let me now get back to uh to this. Okay. So we we're interested in 9 to 10 on the short side. Okay. Now, as a point of initiation, let's keep it super super simple. Point of initiation will be yesterday's close 4 PM. Simple. This is this is almost boring cliche uh point of initiation, but I use it quite often and it works quite well. And now let's just start with space. Uh, let's let's just start with space. Uh two times multiplier. That's fine. and ATR14 and I'll talk about ATR in some other episode maybe in the next episode. So again don't forget to subscribe it's quite an interesting phenomena but now the exit. So now what would be the exit and we only want to be one bar in the position. Okay only one bar because we saw this phenomena just takes between um 9 to 10 or 9 to 11. So one or two bars maximum the exit but one bar should be enough. And now let's have a look what happens. Okay, let me switch off the market quality and now okay so by by itself it's not bad already that there is remember guys this is a short this is a short side in a heavily long bias market. I mean just go figure, right? Like the market goes mostly up and we just discovered short bias. That's very very rare in this market. So this is a great start actually. Let's have a look last three years there's some it's not bad at all. So we definitely we might need to play with it a little bit. So, how about we allow the entry 9 to 11? Okay, let's see. Uh, few more trades, not a huge difference. Let's keep it 9 to 10. Now, we also saw that sometimes the short move last two bars. So, let me change this two bars. Okay. It's a little bit slow because when I'm recording it takes a lot of resources. So, it's slower. Oh, that's that's bad. Okay. So, we have to keep one bar exit only. So, it's def it's it's all it is. It's one hour strategy. Okay. So, we want to stay in this strategy one hour.
Now, what I'm thinking, we still have lot of obviously noise here. What I'm thinking, we should probably increase the multiplier. Now again what we saw in the initial analysis is we're we're hunting uh big down movements over 3% and there are not so many of them and when this volatility uh expansion the burst of volatility happens maybe the multiplier of two is too too close. Okay. So let's expand it to three two and a half 325. Let's try three three and a half. And now a very quick shout out to our sponsor, Breakout OS. In the new era of AI, everything you know about building trading strategies has changed completely. All the generalist principles no longer work. And that's why Breakout OS is a complete game changer. It is a highly specialized no code platform built for the AI revolution. It's the choice of true breakout trading professionals from leading critical traders to hedge funds managers. This will fundamentally transform your workflow and change your trading forever. See the paradigm shift for yourself and sign up for a completely free walkthrough at www.breakos.com.
Wow, that's much better guys. Last three years smooth, perfect equity curve. Very nice. How about we try? But we we might have too few trades already. I would still go three. Let's go three. And let's see. Nice. Beautiful. That's it, guys. That's it. That's the free money, right? That's the free money. That's it. Have a look. We just found an edge. Simple. Super super simple. Last three years. I don't think we even might need a filter for this one. Okay. So, the average trade is three points. one full point in E- mini S&P is $50. So we should we should be over $100 on average especially last three years uh sorry last three years for this trade. I don't think we need any filter. I think I think this is super exciting. It's really really neat. It's pretty good and it's simple. It's simple. I love it. I love simple strategies. simple breakout strategy. So basically the point of initiation we have yesterday's close at 400 p.m. The space is three time of ATR14 ATR14. Okay, ATR14. That's it. Uh and three times ATR14 and uh we exit one bar later. That's it. Wow. Incredible.
Okay. Now the question is are we overfitting? Right? It's always a very good question. It's very important. Are we over fitting? And probably we are. But listen, it's super super hard to find short uh opportunities in uh indexes. So we might not we we must not be so picky. We need to improvise a little bit, open our minds, but we still need to check if how much this is uh actually overfit. And I if this is over fit all we need to do we need to uh introduce regular optimization. Okay. So that's why we go to breakout space calibration. We keep the same setting. Let me check. And we just calibrate for different space. Let's let's test it for space one to five multiplier 1 to 5 0.5. That's the default setting. This might take few seconds because uh it's few iterations. This is guys so this is so exciting. Um that's why I love recording these videos to to show you exciting stuff like that. Okay. Uh it's a little bit slower again when I'm recording the whole uh laptop gets a little bit slower otherwise it flies. And what what do we see here? So this is the breakout singularity confidence index and this index tells us whether it's rather overfit or where it's a strong singular um space calculation and this is this is poor. So even this analysis shows us that three produces best net profit, best win rate rate, best net profit draw down ratio and still keeps a reasonable amount of trades. 247 not bad for e- mini S&P on short side guys short side but actually it's it this particular would be overfit. Let's see if we take in sample 75%. Uh still poor okay still very poor breakout singularity confidence index that suggest overfeed and if we check just out of sample last 25%. Oh it's even worse. So definitely overfit. Okay.
So what does it mean? Well, it actually means that for this particular edge, we would need to deploy regular opt reoptimization of this space and the regular reoptimization would have to be uh so the for me the good range would be from two to four. Let's have a look. Up below two, we're dropping with net profiting bit, dropping with win percentage, dropping with net profit draw down ratio. Uh so definitely you would need to have regular optimization between two and four. That's what I would do. Four. Okay, four even four and a half. But four and a half, we're getting two few of trades already. Okay. So that that's where I would do it. So actually for this particular strategy you need to deploy work forward optimization and reoptimization with the range of the space between two and four and I would would go step 0.5. I think that should be pretty fine. But anyway this is exciting. This is exciting because short edges not easy find in indexes. And all we did guys and let me remind you this is so crucial. All we did we started with this simple analysis. We do not need to make this overly complicated. We just need to have a good sense for trades, some understanding, good eye. And with a good eye we can spot opportunities like this. then work them out and create some fantastic breakout trading strategies.
So, if you like this one and if you want to see more like this one, definitely you must give a like and of course subscribe because another one is coming out already next week. I told you guys I'm going to show you how how to make lot of money in breakout trading. I'm a breakout trading specialist. I understand breakout trading like no one out there really. I spent in my entire life with breakout trading. Uh and again don't forget so this is the book. This is my book. You can learn about breakout trading from me or download this one completely for free. Although that's not so extensive. That's that's quite just an brief uh introduction. But there's so much money so much money in breakout trading. You would not believe that it works on any market. It definitely is the best you can do to make yourself another breakout trading specialist. So again, become a breakout trading specialist with me. Subscribe and I'll see you in the next one next week. Set your spirit free.