Tomas Nesnidal came to trading from an unusual direction. He spent his early career as a film and TV director in the Czech Republic, then shifted into trading out of financial necessity and the desire for location independence. He and his wife had already traveled to over 60 countries by the time we recorded this conversation. Automated trading made that possible in a way that discretionary approaches simply couldn’t.
Tomas spent time working through every major style, day trading, options, spread trading, statistical arbitrage, before landing on breakout strategies as his primary focus. He’s now 100% automated, trading futures exclusively, with heavy emphasis on portfolio management and position sizing alongside the strategies themselves. Breakout trading suits his temperament and, crucially, keeps producing robust results when tested properly.
This episode is as practical as BST gets on this topic. Tomas breaks down the four components he uses to build every breakout strategy, explains why simplicity usually beats complexity, and shares his views on creativity as the real edge in systematic trading.
Watch the full episode below, then read on for the complete breakdown.
Why breakout strategies work
Tomas frames breakout trading as a variation of trend following rather than a separate style. The logic is straightforward: a breakout to a new level signals that something in the supply/demand picture has shifted enough to push price through a meaningful threshold. That initial push is often the beginning of a larger move.
He pointed out that many of the great traders from the Market Wizards era built their careers on trend following. Breakout strategies carry the same conceptual DNA. The overall approach has a long track record across markets and time periods. But the original simple breakout systems, enter a fixed distance from the open in the direction of the trend, have degraded over decades as markets evolved and more participants adopted similar approaches.
The response to that degradation isn’t to abandon breakout trading. It’s to get more creative about implementation. Standard breakout signals are now arbitraged away quickly. But novel variations, different reference points, different distance calculations, different filters, still produce edge when tested properly across multiple markets and time periods.
The biggest benefit Tomas cites is universality. A well-designed breakout concept can work across many different futures markets. That allows genuine diversification at the strategy level, not just at the market level.
The four components of a breakout strategy
Every breakout strategy Tomas builds uses the same four-part framework. He thinks of breakouts as fundamentally being about two things, space and time, which he splits into four operational components:
- Point of initiation – where in price space does the strategy start measuring from
- Distance – how far from that reference point does price need to travel to trigger a trade
- Time filter – when during the trading session is the strategy active or inactive
- Regular filter – additional conditions that qualify or disqualify a potential trade
These aren’t independent. The combination of point of initiation and distance defines the actual entry level. The time and regular filters determine which potential entries actually trigger a trade. Getting the interaction right between all four is where the real development work happens.
Point of initiation: where to start measuring
The point of initiation is simply a reference price level from which you measure the breakout distance. Options include yesterday’s close, today’s open, the high or low of the past N days, a moving average, or something more exotic like an adaptive moving average or a pivot point.
Tomas’s consistent finding is that simple reference points often work as well as complex ones. Some of his strongest strategies use yesterday’s close as the point of initiation. Just yesterday’s close, nothing else, can produce robust results across a wide range of futures markets.
His development process is creative and systematic at the same time. He’ll spend a few days generating ideas on paper, then several weeks testing them. Out of 30 or 40 candidate reference points, maybe one or two will pass his robustness criteria. Most get rejected. The ones that survive tend to be simple ones.
He noted that some markets are harder than others. T-Bonds and T-Notes are particularly difficult for breakout strategies. In those markets, you often need more complex reference points, adaptive measures, or multi-timeframe approaches, to find anything that holds up. Index futures tend to be more forgiving of simple reference points.
Distance: how far is far enough
Once you have a reference point, you need to decide how far from it price must travel before you enter. Too small and you get filled on noise. Too large and you miss the move or enter too late for the remaining potential to justify the risk.
Tomas’s default approach is a multiple of average true range. ATR is a natural distance measure because it scales with the current volatility of the specific market. A fixed point value that works for crude oil will be absurdly small for gold or too large for a bond market.
He also uses raw true range rather than averaged true range in some strategies, which removes the lookback parameter from the distance calculation and simplifies the model. Fewer parameters generally means better out-of-sample behaviour.
A more creative option he’s explored: take two moving averages and use the difference between them as the distance multiplier. When the averages are far apart the market is trending and the distance is wider; when they converge the distance tightens. This creates an adaptive distance calculation without adding a separate volatility indicator.
Price action reference levels, like previous day’s high or a swing high, can also be used as distance anchors rather than calculated levels. Tomas tends to use these more as filters than as primary distance calculations, but they’re worth exploring.
Time filters: not all hours are equal
Markets don’t behave uniformly throughout the trading session. Tomas runs analysis to find periods during the day when a given market shows consistent directional bias or more reliable breakout behaviour. A strategy that works well from the open might be noise-prone in the middle of the session and work again heading into the close.
On 24-hour futures markets, this becomes more nuanced. He treats the full 24 hours as valid data but acknowledges that certain windows, typically the main session for the relevant geographic market, carry more weight because that’s when the dominant participants are active. A time filter that restricts trades to the US day session on an equity index future, for example, often improves results compared to allowing trades at any hour.
His patterns look back one to five days, so they’re measuring daily-bar behaviour even when entry timing uses intraday data. A setup on the daily chart might trigger an entry at a specific time within that day based on what the market does intraday up to that point. The daily pattern sets the context; the time filter refines the execution.
Regular filters: reading market conditions
The regular filter layer is where Tomas’s 40-pattern library comes in. He built these patterns over 15 years, starting with basic ideas and expanding them systematically. They fall into families:
- Volatility and expansion patterns, measuring how volatile or directional the market was before the potential entry
- Indecision patterns, measuring the level of back-and-forth before a potential move
- Directional patterns, measuring how much the market moved up or down before the entry bar
- Classical patterns, inside bar, outside bar, and related bar combinations from traditional technical analysis
He has a second file with over 130 patterns for deeper analysis, though he typically starts with the 40-pattern core set. The process is to run the trigger candidate through all patterns and see which conditions historically produce better results for that specific entry type on that specific market. A trend-following entry type responds to different setup conditions than a mean-reversion entry type.
One finding worth noting: the S&P 500 E-mini is very difficult to trade with intraday trend-following breakout strategies. Tomas hasn’t found reliable filter patterns that produce decent setups for trend entries on that market. Mean reversion works better. The DAX future behaves more like a trending market. Understanding which markets suit which modes is part of the research process.
Robustness over curve fitting
Throughout our conversation, Tomas kept returning to robustness testing. His definition of a good strategy isn’t “looks good on a backtest.” It’s “passes my robustness criteria.”
His criteria include performance across many different walk-forward windows and across multiple markets, not just the market it was designed on. A strategy that only works on one market with one set of parameters isn’t robust. A strategy that works across several different markets, perhaps with slightly different parameter values but the same logic, is much more likely to continue working.
He runs 30 to 40 candidate models for each component combination and expects only one or two to survive robustness testing. The rest get discarded. This ratio, most ideas failing, is normal and healthy. It means the ones that survive are genuinely robust rather than data-mined to fit a specific historical period.
Simple models tend to pass more often than complex ones. When he’s found something that works, adding more conditions usually doesn’t improve it. The relationship between simplicity and robustness is strong enough that he now starts with the simplest possible implementation and only adds complexity when he has a clear reason to.
Creativity as a trading edge
Tomas is unusually direct about something most systematic traders don’t discuss: creativity matters. Standard breakout ideas are well-known and widely implemented. The edge comes from finding novel combinations of components that other traders haven’t tested or implemented systematically.
His film director background helps here. Generating ideas is something he actively cultivates. He’ll spend time just thinking, pen and paper, generating the strangest possible reference points or distance calculations. Some of these produce nothing. Others turn into strategies that go straight into his live portfolio.
The key practical lesson: don’t limit your ideation by what seems logical in advance. Test the crazy ideas. The market often rewards approaches that seem counterintuitive.
Get the show notes & transcript
Related episodes
- Andrea Unger on entry techniques and reading market behaviour
- Nick Radge on the best trading systems and what makes successful traders
- Andreas Clenow on trend following in stocks
- Jerry Parker on 30 years of trend following experience
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