In spite of the call of financial independence and unlimited profits, the majority of traders are not consistent and unable to build their accounts. The risky nature of the trading environment and all the available trading strategies make it difficult for traders to find the proper way to success.
Most traders are at crossroads either using unproven strategies or simply do not have a clear guide to follow. This is a significant obstacle to reaching financial objectives, particularly where the initial amount in hand is quite low.
But there is one market strategy that bucked the trend, investing a small $9,100 into an impressive sum of $82 million over eight years. The whiz who made it all happen is Kristjan Kullamagi, a day trader whose accuracy and creative thinking about stock trading have gained him recognition as well as a generous fortune.
His five-step approach blends sound principles with a good eye for market timing, making use of particular indicators and technical analysis to spot high-probability trades. With the help of tools such as TradingView, which has a personalized stock screener and complex charting capabilities, Kristjan was able to design a successful system that can be utilized by traders to detect profitable trades in the market.
In this article, we’re going to explore Kristjan Kullamagi’s five-step trading strategy that helped him build his account to $82 million. We’ll demystify each of the five key steps that made him successful, ranging from selecting the appropriate stocks to using the ideal indicators.
You’ll also discover how Kristjan employed an unconventional take-profit strategy and a trailing stop loss method that ensured he made the most out of his gains.
Step 1: Finding the Correct Stock
The initial step in Kristjan’s trading plan is identifying the appropriate stock to trade. He searches for stocks that have had substantial recent price action, namely those that have had a 30% to 100% increase over the past three months. By targeting stocks that have had strong upward action, he is confident that the stock is in an active and dynamic state, making it more likely that the trade will be profitable.
To find easily such stocks, Kristjan makes use of the TradingView stock screener. Here’s how you can mimic this:
- Go to TradingView and click on the Stock Screener tab.
- Click on the Filters tab and choose “Common Stock” under the filter selection.
- Modify the filter for “Change in the last month” to over 30%.
By doing this, you’ll be presented with a list of stocks that have risen by at least 30% in the last month, which Kristjan considers an ideal starting point.
Step 2: The Role of Moving Averages
After identifying potential stocks, Kristjan uses two moving averages to further analyze the stock’s behavior. The two moving averages he employs are:
- 10-period Simple Moving Average (SMA)
- 20-period Simple Moving Average (SMA)
Kristjan is using these moving averages to determine if the stock is consolidating or “surfing” moving averages. Such consolidation is very important because the stock has put its upward run on hold and might be waiting for another run.
To apply the moving averages on TradingView:
- Go to the Indicators tab and enter “Moving Average”.
- Add two moving averages, one set for 10 periods and the other for 20 periods.
- Modify colors of these lines to improve their visibility.
Kristjan specifically targets stocks where price remains close to these moving averages during consolidation. Ideally, the stock must remain stable even when the overall market indices, such as the S&P 500, are showing a decline, indicating the stock’s relative strength.
Step 3: Waiting for a Breakout
After consolidation, Kristjan waits for a breakout. A breakout is when the stock price breaks above the resistance level set during consolidation. Kristjan likes to enter the trade as soon as the breakout candle is formed, instead of waiting for a retest of the resistance level, which is more popular among traders.
This involves being cautious when viewing the chart. Kristjan advises using a bigger timeframe, e.g., the daily chart, to validate the breakout and avoid being caught by false signals.
Step 4: Setting the Stop Loss and Take Profit
In step 4, Kristjan places his stop loss below the daily candle’s low which had broken the resistance. That way, the risk is minimal because he already knows how much he’s willing to lose in case the trade does not go as planned.
Kristjan’s method of determining a take profit level, though, is a bit different. Instead of applying the common 2:1 risk-to-reward ratio or having a definite profit target, he uses time to determine his take-profit. More precisely, Kristjan sells one-third of his position after 3-5 days, depending on the number of daily candles elapsed. This technique allows him to take some profit while still keeping the position open to run if the stock keeps going.
Step 5: Implementing a Trailing Stop Loss
The last step of Kristjan’s plan is where the actual profits are made. Having sold a third of his position, Kristjan implements a trailing stop loss based on the moving averages. As the stock price keeps going up, the moving average trails behind, locking in profits in the process.
If the price of the stock finally falls and goes below the 20-period moving average, Kristjan closes out the remaining position. This helps him catch huge, multi-week moves while reducing the risk of losing profits when there is a pullback in the market.
Why Kristjan’s Strategy Works
One of the best reasons that Kristjan’s strategy performs so well is that it has the ability to capture huge price movements. Although Kristjan’s strategy has a low win ratio (a low as 30%), the significant profits in the winning trades compensate for the losing trades. For instance, losing trades might only incur a loss of 1%, whereas winning trades can reward 20% or higher.
Kristjan himself has admitted that his trading journal tends to resemble a “sea of red,” but it’s the big winners that bring him to gigantic profits in the long term. The most important thing to remember here is that the risk is low, but the reward can be sky-high.
Conclusion
Kristjan Kullamagi’s trading strategy is a powerful reminder that success in the markets doesn’t necessarily come from following the crowd. His five-step approach, combining careful stock selection, precise technical indicators, and unique profit-taking strategies, has allowed him to turn $9,100 into $82 million. While this strategy isn’t foolproof and requires dedication and patience, it’s a proven method for traders looking to capture significant profits in the stock market.
For anyone wanting to copy Kristjan’s success, the combination of employing TradingView’s stock screener, moving averages, and a time-based take-profit strategy is a good starting point for any trader wanting to increase their account size. As a beginner or a seasoned trader, this strategy might be the break you’ve been searching for.