The Winning Stock Trading Strategy from the 2023 US Trading Champion
- FinancialWisdom
- 1 day ago
- 7 min read
Marios Stamatoudis
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Video Transcript Below:
In today’s video, we deep dive into the trading strategy of Marios Stamatoudis, the swing trader who grabbed fourth spot in the 2023 US investing championship with a huge 291% return in less than a year.
Unable to picture himself analyzing food while studying Food Science and Human Nutrition at the Agricultural University in Athens, Marios started to find ways to make money online. A simple Google search ranked Stock Trading and Investing as the third best option to make money online. It sounded interesting to Marios, and that’s how he picked up trading.
With some elementary knowledge, he started day trading and thanks to excessive leverage, blew his account in just 3 days. That obliterating experience shook him to the core. With a hurt ego, he took up some courses and alert services and started trading again just to last seven days - a little better than his last time.
It was then that he started studying and discovering trading to figure things out on his own. The little progress each day drove him to own the process he was building. It didn’t take much longer for Marios to become profitable as he plugged most of the gaps in his trading strategy and discipline.
Marios posted his first breakeven year in 2017, recovered all his past losses and expenses in 2018, and achieved high triple digit returns in 2019. A major turning point came in 2020 when Marios was still day trading and closing out positions on the same day. He was mad when he saw so many stocks continuing to go up and up, and had he just held the stocks for a couple of weeks, he would have made more money than battling around with new trades every day.
Determined to take action, he immersed himself in books by some of the greatest swing traders, such as William O'Neil and Mark Minervini. While still deep in his reading and learning from the experts, he transitioned to swing trading, incorporating many elements from his day trading framework. It proved successful for him. He also discovered the Twitch stream of Christian Kullamägi and was amazed to see the similarity in their trading approaches. Ultimately, he left day trading and fully embraced swing trading.
Once he was back from his mandatory military service, Marios started swing trading again in 2022. He joined the US Investing Championship in late January 2023 and still managed to rank fourth.
Marios follows three key swing trading setups
Classic Breakouts, Episodic Pivots and Parabolic Shorts
There is a huge similarity between these setups and those followed by Christian Kullamägi. Both of them pivoted from day trading to swing trading, and they ended up taking setups from their previous styles.
As a daily routine, Marios skims through well-laid out scanners for these setups, wherein he has the best-performer screen on 1-month, 3-month, and 6-month timeframes. He screens through individual names on the list, looking for the desired setup. He specifically looks for price tightening on the right side after a big move. When he sees a stock that shows promise, it goes onto the watchlist. He then identifies the setups that are ripe for breakout, puts a trendline on the breakout zone, and creates an alert.
He also has a Dense Volume scanner that identifies stocks with a massive change in volume. Typically, it compares the average last 40 days to the 52-week volume and throws out the stocks in the top decile of the list. This scanner comes in handy for episodic pivots.
He also has an IPO screen where he looks for stocks that can be shorted after parabolic moves.
An important criterion in all these scanners is Average Daily Range and Average True Range. Both are measures of average movements in the stock price, with the main difference being that ADR does not consider gap-ups and gap-downs for calculating the range, while ATR does. Marios looks for high ADR (typically 5%+) to filter stocks that move faster during the day.
Marios also does a detailed weekly scan to identify the themes that are doing well at any point and determine the basic market structure that is extremely helpful while running daily scans. It makes sense, too, because if you have a better bird’s eye view, you can be much better prepared to trade every day and act fast. For example, he played the AI and Crypto themes very well, which gave him several high flyers while he competed.
Let’s now look at the setups
In the classic breakout setup, Marios looks for a big move in the past one to six months. While Marios doesn’t mention a specific quantum of increase, Kullamägi trades the same setup with a 30-100% price increase. This price jump is followed by an orderly consolidation in which price makes higher lows, surfing the 10, 20, or 50-day moving average. The consolidation lasts from two weeks to two months and is followed by a range expansion or breakout. Like Kullamägi, Marios also puts in alerts when the price hits the trendline drawn on consolidations. The entry happens when the price crosses the trendline with the stop loss placed at the low of the breakout day.
For example, he traded GREE when it was forming a down channel after a 140% move from the low in a short time. The stock broke out from down channel on this day at $2.8 and went up 200% in two weeks. The stop loss was placed at $2.4, which was the low of the breakout day candle. With a risk of 11%, this was an up to 20x reward trade.
Marios didn’t take the trade that far because of his standard exit rules. He takes partial profits as the stock reaches 2.5-3x the ADR and trails the rest of the position using 10 DMA for fast-moving trades and 20 DMA for slower-moving stocks. Apart from that, to minimize the risk after the trade has delivered a certain multiple of risk, Marios moves his stop loss to breakeven, locking in the downside from the trade.
Let’s look at the next setup now - The Episodic Pivot
In an episodic pivot, a sleepy stock gaps up, led by a catalyst like an earnings surprise, a drug approval, or a regulatory change. Marios quantifies the gaps as 5% or above but acknowledges that bigger gaps provide better opportunities. A common theme in this setup is a beaten-down name that has not done much in terms of price action in a long time, springs to life led by a catalyst.
The entry in this setup varies from case to case for Marios, but Kullamägi gives an objective entry point for episodic pivots, which is the opening range high. This can be the high of the first 1- 5 or 60-minute candle. The stop is at the lows of the day.
Many of the big winners in Marios trading account came from this setup. For example, he traded Gigacloud Technology, or GCT, in December 2023 when it gapped up 13% from the previous day's close on an earnings surprise. The stock delivered a 70-80% return in one month. Here also, the risk-reward was quite favorable at 1:8.
The third setup Marios outlined is the Parabolic short. In this setup, he looks for stocks with big moves in a short time. Such moves can range from 100% to 400%, and with moves that strong, shorting such stocks can be risky. This is where stop losses and risk management become crucial.
The setup mainly emphasized the mean reversion. Like Kulamaggie puts it, “think of stocks as rubber bands, if they get really stretched short term, they can have powerful snapbacks.” The idea is to short them at the first sight of stress. This could typically be done on an intraday chart when you see stock not being able to maintain momentum. The simplest way to enter is when the stock breaks the opening range low. This could be the low of the first 1, 5, or 60-minute candle. If the stock opens up, the first sign of a crack can be a red candle on a 1, 5, or 60-minute timeframe. To be doubly sure, one can wait for the stock to have the first crack, bounce back into VWAP, and if it fails at VWAP, then enter.
The stop loss has to be the high of the day or the high of the entry candle if the daily high is too far.
Now, let’s look at some statistics that Marios posted in the championship. His win rate was 32% overall, and it ranged from 25% in bad markets to 40% in good markets. He took 2 trades a day or 400+ trades in the year. His average gain-to-loss ratio was 5:1, meaning his average gain was 5x his average loss. The system has massive positive expectancy despite a low win rate because Marios would have gotten a few huge winners that would have dwarfed many tiny losses.
The 291% annual results are commendable, given that Marios joined in late and reportedly did not use any leverage for trading. What stands out in his system is that it builds in a lot of failure as Marios risks 0.25-0.4% of his trading account in one trade. This way, even when he has 10 losing trades in a row, he would be down a maximum of 4% - a drawdown that isn’t too hard to come back from. He did make some mistakes while in the competition but they were just tiny blips on a monster performance chart.
The process I follow is rather similar albeit on a far higher timeframe, I use weekly charts which means the process is far more passive with my analysis completed on the weekends. Just like Kullamagi and Marios I look for breakouts showing strong momentum. Our scanner was designed specifically for this purpose, we filter the Quality metrics of a stock and apportion a value to it, we do the same for the various metrics of Momentum and then look at the breakout characteristics within a Technical score. Merging these scores into a total score allows me to home in on the very best selections for further analysis. Anyone interested in the scanner or even following my trades can join us using the links below.
In the end, for all traders, it boils down to the basics - picking up a style that promotes positive expectancy and following it with discipline. This is what enabled Marios to produce a solid annual return, and its teachings can help guide you too. Marios leaned on Kullamaggie’s approach, a breakdown of which can be seen here.
As always, thanks for reading! Be sure to check the links below for more resources available to you.
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