The 3 Rules of Breakout Trading Success

I know you want the formula. It’s coming.

But I have to warn you first: the formula alone is extremely powerful, and it will still not work well unless you follow three additional rules.

I had to work hard for these rules. I learned them the hard way. They are universal to all success, but for trading they matter even more.

Please don’t repeat my mistakes.

Rule #1: Why should you specialize in one trading approach?

Jumping from one trading direction to another was one of the worst mistakes I made before my breakout trading revolution. It is also exactly what most traders do, every single day.

My epiphany convinced me that a revolution cannot happen without deep, concentrated focus. I’m more and more persuaded that the key ingredient to any success, in any area of life, is absolute concentration of focus. Specialization.

Look at doctors. It’s the cleanest proof I know that specialization correlates with financial reward.

A general surgeon — no specialization — earns on average $382,000 a year in the US. A neurosurgeon earns $662,755. That’s a 75% increase, purely because of specialization. An extra $280,000 a year. Your spouse will notice.

A thoracic surgeon adds $220,745 (+58%). A vascular surgeon adds $94,300 (+24.7%). A plastic surgeon adds $91,212 (+24%).

And that’s nothing. James Andrews is among the 20 richest doctors in the world, worth up to $100 million by some estimates. He didn’t specialize in a branch of medicine — he specialized in his clientele. Athletes only. He’s now the number one choice for athletes across all sports and team doctor for the Auburn Tigers, Alabama Crimson Tide, and the Washington Commanders.

Does specialization work outside medicine?

Who is the richest movie director on the planet?

Most people say Steven Spielberg. He’s directed over 50 movies and produced over 100. He’s very rich. He is not the richest — because he isn’t specialized in any genre.

The richest is worth $5.1 billion and directed five movies. Not fifty. Five. His name is George Lucas, and his specialization is Star Wars.

Michael Bay is the fifth-richest director in Hollywood, and his specialization is loud, explosive, fast-paced spectacles — Transformers, The Rock, Armageddon. He is not trying to direct musicals.

Peter Jackson is the fourth richest. Can you name one of his films outside The Lord of the Rings? I studied at film school and I can’t.

Even in artistic movies it holds. Woody Allen’s weird, neurotic, low-budget films look like a starving-artist career. He is the 23rd richest director in the world, with a net worth close to $100 million. Because even a weird specialization is still specialization.

What about traders?

Ed Seykota turned $5,000 into $15 million for a friend. His specialization: trend-following in futures markets. No fancy algorithms, no forex, no Bitcoin. Just trend-following applied to futures.

He trained Bruce Kovner, who became a trend-following specialist in his own right and is now worth $3.5 billion.

Robert Pardo has been in the business over 40 years and his fund Pardo Capital has won numerous awards. His specialization is Walk Forward Analysis — a method he invented.

Tony Saliba had 70 consecutive winning months. Six years straight, every month profitable, and every one of those 70 months showed at least $100,000 in profit. His specialization: options trading. One single thing.

I decided to become the ultimate specialist in algorithmic breakout trading. I got the nickname “Mr. Breakouts” for it.

You can too. But if you decide to specialize in breakouts, be prepared to stick with it for at least a few years, until you truly master it.

Being great in one area beats being mediocre at several.

Rule #2: What does it mean to think globally as a trader?

Most good businesses today share one growth strategy. I call it global impact. Anyone with a sound, proven idea wants to be everywhere — every market, every country, every region.

And it’s usually not about profits. It’s about diversification.

Imagine what Starbucks would be doing today if their only market was Russia. They’d be fighting for survival instead of growing worldwide.

Apply the same logic to your trading business. Once you prove your concept locally — on a few markets — start expanding. Instead of increasing contract size the way most traders do when they want to scale, first grow globally.

I call it system-sizing: more markets, more strategies, ideally as non-correlated as possible.

This is exactly why I do not trade forex or crypto, even though the formula would work there. I trade futures exclusively because there are no better markets for building a truly global trading business. Futures allow the most sophisticated diversification across highly uncorrelated markets, which lets me hedge my breakout income against future unknowns.

That global strategy is my ultimate hedge policy. It’s also a highly regulated environment, which I can’t say about forex or crypto.

And with micro futures, you can do this on a modest account.

I proved the formula on Indexes first, then branched into Energies, Grains and Metals, then Currencies, European markets, Bonds, Softs and Meats. That’s how we built over 2,000 strategies in my hedge fund. Partly because we could — and partly for the luxury of having enough strategies to build the best possible portfolios in any economy.

Rule #3: Why is creativity part of the formula?

The beauty of the Mr. Breakouts formula is that you can get highly creative with it.

That’s the best news ever, because it means it can never become overtraded. Every trader applies it differently. All those variations make failure of the formula itself practically impossible.

It is endlessly scalable. I could teach it to every trader in the world and it still would not fail.

The moment you put a little creativity into it, you own your own version. I’ve been trading this formula for over a decade, and today it’s doing as well as it did on day one — if not better.

But you need to do the work. Pen, paper, your own ideas.

In the chapters ahead I’ll point out the exact places where your creativity belongs. Don’t treat that as an obstacle. It’s a gift.

Nothing in life is science only, including trading. A good flow of trading income depends on balance between the left and right hemispheres of your brain.

Now let’s dissect the formula.