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Risk and Reward: Reality and Rationality

No system, method, or indicator can be effective at all times. The 30MBO in its present state of refinement is not different than other methods in that it is not a panacea or the Holy Grail. It is merely a way of interpreting and dealing with the reality of the markets. And that reality is that systems take losses when they're wrong. The further reality is that systems can and will be wrong a successive number of trades on occasion. This reality is inescapable. However, it is not something that leaves us without an alternative. Here are some suggestions for dealing with the natural drawdown and inaccuracies of the 30MBO:

ж When is the 30MBO best used? The reply here is similar to what applies to all trading systems. The best time to begin using the 30MBO is after it has experienced a series of losses. I recommend you find a market in which you wish to use the method and track its performance. After it has been wrong at least three times in succession, begin using the method. This will likely increase your odds of success, inasmuch as several losing trades tend to be followed by a fairly large winning trade.

ж Be rigid with your stop loss procedure. Whether you have opted to use a dollar risk stop or to use the reversing method I have suggested, be consistent and rigid in applying your rules. Only by limiting your risk will the bottom line of your efforts with the 30MBO be successful.

ж Attempt to trade the same markets consistently. Don't jump from one market to another. If, for example, you decide to trade the Swiss franc, T-bonds, and crude oil, then do so consistently, attempting to take signals every day. Should you be unable to trade every day, then attempt to trade on the same day or days of the week in the event that there may be a day-of-week pattern biasing the results.

ж Don't trade markets in which the risk is too high. In other words, if trading in S&P 500 futures entails more risk than your capital and /or temperament will allow, then simply avoid this market. The good thing about using my 30MBO method is that it allows you to pick the markets you want to trade and to avoid the markets that are too risky for you.

Summary

This chapter presented the 30-minute breakout system (30MBO). I discussed the specifics of the method as well as the rules of application, limitations, assets, liabilities, uses, and abuses of this approach. I also gave you specifics as to which markets are best traded using the 30MBO. It should be noted that the 30MBO is not a static method in terms of indicator lengths. It is a method that must be adapted to existing market conditions. The adaptive and astute day trader will be able to readily discern when changes in market conditions require adjustments in the 30MBO. The 30MBO works best in active markets.