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How does one trader turn $9100 into $82 million?
Summary
· The strategy
· What I have learned after testing it and learning it for the last 82 trades in 3 months
· I’m still learning and implementing, haven’t made a profit yet.
· Here are the mistakes I had made so far.
· How to implement faster and easier screeners and other resources with hundreds of examples and screenshots.
Introduction
I was introduced to Kristjan Qullamaggie, on the video below, as a trader that took his account from $9,100 in 2013 to 82’000,000 in 2021.
Please watch this video so I don’t have to describe the system, is very short and you will understand the rest of the article much easier.
I found this hard to believe so I decided to start learning his trading system for the last 3 months. He has done a really good job explaining his strategy on qullamaggie.com, I think he is a natural teacher but it will take you over 100 hours to get on the right path. I’m sure this article will accelerate that process.
Even though the system seems simple, it takes a lot of experience, like every other good system that I have ever encountered, is not 100% mechanical and the theory is easy to understand but implementing may take months.
I must mention that I have experience with similar systems, and still, it took me at least a month and a half to understand the details.
Patterns traded
Qullamaggie trades 3 setups only: Common Breakout, Parabolic short Episodic Pivot. Currently, I'm only studying and applying the “Common Breakout”.
They look like this:
Rules:
The basic rules are to:
Look for a trend where the stock goes up 30% to 100%.
Wait for consolidation of 2 to 8 weeks
As soon as that consolidation is broken get in and put a stop in the low of that day.
Take 1/3 of the profit after 3 to 5 days and move your stop to breakeven.
Take the rest of the profit when a bar closes under the 10 or 20 moving average.
Example:
Scanner
How do I find a list of stocks like this?
The first step and the most difficult for me was to apply was to create a scanner to find opportunities.
I ended up with a scanner in trading view, which anyone can use quickly. Is also very effective, I have found a formula that matches 90% of the same stocks he finds in his daily routine.
If you wonder what the parameters are:
Note: if you haven’t yet. Click here and open an account in tradingview https://www.tradingview.com/gopro/?share_your_love=ney123456789 , I get up to $30 if you upgrade to a paid plan. Which I suggest you do anyway.
Trading diary
This is something I wished I had implemented since I started trading over 14 years ago. It serves two purposes. First, you can go back and review your trades. And second, helps me as a checklist every time I get into a trade.
Analyzing results from the diary on the first 3 months:
I spend probably 16 hours, analyzing my trades, going back and forward on how to analyze this data.
One of the “A-ha” moments I had while doing this is to go through each trade and see what happened after I closed the trade a couple of months later. So, I added the section:
Review of trade months later:
· Was exiting a good idea?
· Optimal exit would have been?
Then I plotted a ruler on the chart to see what would have been the perfect exit.
Here is what it looks like:
This means that in this case, I would have made the most money if I had exited after my initial risk would have grown over 200%.
Here is what I found after 82 trades
First lesson
The first mistake I made is to trade illiquid stocks. I set it as a parameter only to trade stocks over a $500M market capitalization. Turns out this is the wrong metric because big stocks over a billion in market capitalization can still be illiquid. To avoid this now I’m setting a new parameter in my scans “Volume*Price”
And every time I’m going to put a trade-in, I visually check that the spread is not big
11% of my trades turned out to lose more than I initially expected, all except 1 because they were too illiquid even if they had a big enough market capitalization.
Second lesson
82% of the time I was glad I set up a stop loss where I did.
Third lesson
The average best place to take profit would have been at 2.3 R, or 232% gain.
Fourth lesson
ADR % didn’t matter as much as Qullamaggie said. ADR % is an indicator used to see “fast” stocks vs “slow” stocks, I didn’t see any correlation in my winners and big ADR%. Maybe this conclusion will change with more data.
Fifth lesson
My best results would have been to take profit at 1.5R or 150% gain. This goes against the golden rule of trading “cut your losers short and let your winner run”
I expect this conclusion to change as I take more trades.
Sixth lesson
Most trades lasted less than 4 days
Seventh lesson
I had more losers than I should have because on good days I took a lot of trades, but they were all correlated. I still don’t know how to manage this correctly, should I lower my position size per trade and take all of them?
My most active day was December 27, 2021, where I took 16 trades, 2 were winners, 1 breakeven.
Eight lesson
On January 23, 2022, I saw this post, which was heaven-sent. Because it helped me realize some details of the system
Keep in mind that 2021 was an exceptionally good year.
He took 1200 trades, that’s roughly 5 trades for every trading day.
And each trade made 0.16R profit on average.
Ninth lesson
The entry is hard to understand. Even after watching over 40 hours of video, because he never shows his exact entries.
Here is the secret:
When the market opens a consolidation is broken and the stock starts going up, it looks like this:
When do you get in exactly?
You have to zoom in into 1-minute candles, 5-minute candles, or 1-hour candles, you choose. Here is the “Trading Strategies | The Opening Range Breakout (ORB)”
For this example, I’ll zoom in on 5-minute candles:
Needless to say, to change time frames all you must do is click here, next to the stock symbol.
Do you see how tight the stop is? For someone looking at daily bars. This is really tight.
He is stopped out 70% to 80% of the time. So keep that in mind.
Conclusion of the first 3 months
· The incredible success that Kristjan has achieved, is due to very tight entries. They are so small that I still have psychological issues to feel comfortable with them.
· Position size: Depends on the liquidity of the stock and conviction on the trade. Most of the time 0.3-0.5%. Rarely more than 1%. Later I found that in 2021 he had 1500 trades, so that puts in perspective that 0.3% to 0.5% per position size is ok.
· His expectancy in 2021 was 1.16R (“R” or “initial risk”, so if you bet 1% of the account in an average trade, you would have ended with 1.16% in average after each trade).
· I’m still figuring out how to cap my risk per day to avoid the correlation of trades.
For paid subscribers:
I’ll create a post with all the details of how to scan, get entries and manage positions really easy step by step. I’ve been perfecting this for the last 3 months and I think is at a point where I spend around 30 to 45 minutes in the morning to execute these trades and write them down in the diary.
Also, I’ll give you access to the historical diary, the diary format so you can use it in google docs, the spreadsheets with the summary of all calculations, the refined checklist I created, a tutorial of step by step for this system, and a page link for you to see hundreds of examples with screenshots and results.
Thanks man for your job. When you said that on average, he made 0.16R on ech trade (eight part), is it right or is 1.16R?