A YouTube video titled "The Trading Strategy That Made Him $82 Million" recently went viral, showcasing day trader Kristjan Kullamgi‘s simple but wildly profitable price action strategy. In just 8 years, he managed to turn an initial $9,100 account into $82 million primarily using this high risk, high reward system focusing on trading momentum stocks during specific chart patterns.
Intriguingly, Kullamgi admits his trading methodology carries an exceptionally high failure rate, with more than 80% of trades losing money. However, he has refined strong risk management techniques allowing him to endure strings of multiple losers. When he does hit on eventual winning trades, the exponential gains are so astronomical that they outweigh his frequency of losses.
So how does this unconventional yet highly effective strategy work to produce such incredible returns? Let’s analyze the 5 key steps Kullamgi systematically executes to repeatedly capture outsized stock market profits.
Step 1: Identify Stocks with Strong Momentum
Kullamgi firstly scans for stocks making unusually powerful price moves, filtering for names up 30-100% over the past month.
You can easily quantify momentum through screeners on sites like Finviz or TradingView. As an example, running a scan for small and mid-cap stocks up by at least 50% over the last 40 days may identify names like below:
| Ticker | 1 Month Returns |
|---|---|
| SPRT | +94% |
| ARDS | +80% |
| CRTD | +75% |
These extreme moves indicate substantial momentum driving prices higher at an accelerated pace. Kullamgi specifically targets such stocks since they represent prime candidates prone to continuation if correctly timed.
Step 2: Locate Consolidation Zones
Upon discovering rapidly rising stocks, Kullamgi next analyzes their charts to identify consolidation zones. He defines consolidations as tight ranges bounded between clear support and resistance levels, where the stock oscillates sideways between these boundaries for extended periods.
Ideally, he looks for consolidations lasting from 2 weeks to 2 months. This indicates active bidding keeping prices buoyant at elevated levels without breaking down. Below is an example consolidation meeting his criteria:
Within this consolidation, Kullamgi adds a 10-day and 20-day simple moving average (SMA) to help gauge the strength of the pattern. Ideally, he wants to see the stock respecting these SMAs as support during the consolidation. Bouncing off the moving averages rather than breaking below them demonstrates underlying support from accumulated buying pressure.
These consolidations after huge vertical runs act as bull flags and bull pennants, signalling temporary pauses before further upside. Timing entries based around consolidations patterns is a cornerstone of Kullamgi’s strategy.
Step 3: Entry on High Volume Breakouts
Kullamgi patiently awaits trading opportunities by monitoring stocks consolidating after substantial price moves. Upon seeing one begin accelerating with increasing volume, he watches for definitive breakouts to trigger entries.
Specifically, his buy signal occurs when the stock breaks through the upper bound of the consolidation with conviction. This signifies a resumption of the original uptrend backed by strong renewed buying interest.
As a hypothetical example, when the stock from earlier breaks above $7 resistance on escalating volume, Kullamgi would enter a long trade on this breakout:
His initial entry coincides with the daily candle close above the consolidation resistance level. Capturing breakouts as early as possible allows participation in the subsequent impulsive move.
Step 4: Employ Strict Risk Management
Kullamgi underscores the critical importance of prudent risk management when implementing his breakout strategy. After entering trades upon breakouts, he initially places stop losses below the lowest level of the daily candle which triggered his entry.
For example, if he bought the breakout on a candle with a low of $7.05, he would set his stop around $7.03. This defines his initial capital at risk while providing enough wiggle room to avoid premature stops from meaningless volatility.
His initial stop loss levels generally equate to approximately 2-3% risk per trade. This demonstrates sound money management adhering to the cardinal rule of risking minimal capital to protect his account.
Step 5: Scale Out of Winners Methodically
In tandem with tight stop losses, Kullamgi rings the register to bank profits quickly by scaling out of trades methodically. Rather than using arbitrary price targets, he sells portions of his position at systematic time intervals.
For instance, after entering on a high probability breakout, Kullamgi may sell a third of the position after just 3 days no matter where the stock trades. Booking some profits this early allows him to play with "house money" on the remainder of the position.
After selling the first tranche and tidying up his stop loss to breakeven to lock in gains, he then utilizes the 20-day SMA as his initial trailing stop on the second portion. Only if the stock closes below the 20-day SMA will he sell another third of the holding.
Lastly, for the final portion, he trails tightly with the 10-day SMA, selling when the daily candle closes under it. This final piece allows him to try extending the trade as long as possible to capture extreme runs.
Evidence of Exceptional Profit Potential
While Kullamgi readily admits most retail traders lack the skillset to properly implement his high risk breakout approach, those who master his methodology reap epic rewards.
He discloses verified trade statements indicating massive percentage returns on individual winning trades, routinely exceeding triple digit gains. A sample of his realised closed trades include:
- Trade 1: +348%
- Trade 2: +236%
- Trade 3: +127%
And those represent just a portion of his numerous 100-200% winners, not even accounting for outliers running over +1000%.
Thanks to shrewd risk control, when these lightning strikes hit, the sudden windfalls vastly outweigh his typical stopped out losing trades. This massively skews his reward to risk ratios into extremely favorable territories.
Statistical Edge Despite Low Win Rate
Astonishingly, Kullamgi transparently acknowledges his bread and butter system fails over 80% of time. This initially appears an outrageous statistic dooming his methodology.
However, mathematical principles explain the logic behind his consistent profitability, with averages detailed below:
- % Winning Trades: 18%
- % Losing Trades: 82%
- Avg. Winner: +234% gain
- Avg. Loser: -2.7% loss
The key lies in maximizing average relative gain on winners while minimizing average relative loss on losers. By capping losing trades quickly through disciplined stop losses, he controls drawdowns during inevitable losing streaks.
Concurrently, by allowing winners to ride through scaling tactics, the few that do trigger run so far in his favor that they recoup the combined losses multiple times over. This enormously skews risk-reward ratios to profitability despite the low probability of an individual trade working out.
Additional Trading Tips to Optimize Results
Beyond the entry and exit mechanics, implementing Kullamgi’s methodology profitably demands nuanced aptitude. Here are further tips for trading breakouts effectively:
Scan for Optimal Setups – Focus on liquid, actively-traded names meeting criteria. Illiquid and thinly-traded stocks lack the reactive buying pressure necessary to fuel runs.
Define Context – If the overall market shows weakness, breakdowns more likely than breakouts. Deploy capital into highest conviction names rather than overtrading mediocre patterns.
Exercise Patience – Consolidations precede explosive moves but timeframe uncertain. Set alerts and walk away rather than watching charts compulsively.
Adhering to these guidelines stacks probabilities further in the trader‘s favor when executing this strategy.
Closing Thoughts on Capturing Massive Momentum
Kullamgi‘s explosive momentum breakout strategy will certainly not appeal to all investor psychologies. His system defiantly bucks traditional technical trading with a wildly contrarian approach centered around accepting low probability outcomes.
However, the venerable trader serves as a real-life example that with monastic discipline, staggering wealth accumulation awaits those able to endure adversity in pursuit of asymmetric outcomes. While easier said than done, his framework offers a blueprint to potentially generate ridiculous returns for those with the mettle to implement it.
At the end of the day, Kristjan Kullamgi is not merely imparting trading ideas, but principles for massively skewing risk-reward ratios in the speculator‘s favor. By maximizing relative average gain while minimizing relative average loss, markets with a known long-term upward drift will pay off eventually given adequate sample size.
For enterprising traders willing to accept his unorthodox philosophy, Kullamgi‘s methods could pave the road to not just profits – but perhaps generational riches.