SetupLens — Risk Management

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Kristjan Kullamägi — Momentum Swing Trader

Low win rate (~25-35%), massive winners compensate. Accepts frequent small losses to capture outsized gains on 3-5 day to multi-week holds. Turned a small account into 9 figures.

Position Size

10-20%

Of account per position. Never more than 30% held overnight.

Risk Per Trade

0.25-1%

Of total account. Used 0.5-1.5% when account was smaller (< few million).

Initial Stop

Low of Day

Placed at the low of the breakout or gap day. Simple, objective, non-negotiable.

★ Critical Rule

≤ 1× ATR

Stop should NEVER be wider than the stock's ATR or ADR. If ADR is 5%, stop can't exceed 5% from entry. This is his #1 risk rule.

"It's all about finding tight, high probability areas to enter so you can have high risk/reward on your trades."

— Qullamaggie, Blog

Stop Loss By Setup

Setup	Entry	Stop Placement	Typical Risk	Max Risk
Breakout / Flag	Above flag high	Low of breakout day	3-7%	≤ 1× ADR
Episodic Pivot	Above ORH	Low of gap day	3-8%	≤ 1× ADR
Parabolic Short	Below support	Above recent high	3-5%	≤ 1× ADR

Trade Management Timeline

Entry

Buy breakout above consolidation high. Stop at low of day.

Day 3-5

Sell ⅓ to ½ of position. Lock in some profit.

After partial sell

Move stop to breakeven on remaining position.

Ongoing

Trail with 10d or 20d MA (depends on speed of move).

Exit signal

First close below trailing MA → exit entire remaining position.

How SetupLens Calculates It

Parameter	Formula	Explanation
Entry	10d_high × 1.001	Just above consolidation high (pivot proxy)
Stop	10d_low × 0.997	Just below flag/consolidation low
ATR Cap	if risk > ATR_14 → entry - ATR	Caps stop at 1× average true range
Floor	min risk = 2%	Prevents whipsaw on ultra-tight consolidations

🏆

Mark Minervini — SEPA Methodology

Two-time U.S. Investing Champion. Only trades Stage 2 uptrends. Capital preservation above all else. Averaged 220% annual returns over 5 years. Extremely precise on entry timing through VCP patterns.

Account Risk

≤ 1%

Never risk more than 1% of trading capital on a single trade. Position size determined by entry-to-stop distance.

★ Iron Rule

7-8% Max

Hard sell if stock drops 7-8% below purchase price. NO EXCEPTIONS. If VCP risk exceeds 7.5%, the pattern isn't tight enough — he wouldn't take the trade.

Entry Rule

VCP Pivot

Entry is at the breakout above the VCP's tightest contraction — NOT the 52-week high. Volume 40-50%+ above average on breakout day.

Chase Limit

≤ 5%

Never pay more than 5% above the pivot/buy point. If you missed the breakout, wait for the next setup.

"I'm looking at the price, just looking at the price when it gets through the level and then watching very carefully the subsequent action, seeing if it holds up."

— Mark Minervini, Interview

Stop Loss By Setup

Setup	Entry	Stop Placement	Typical Risk	Max Risk
VCP	Above pivot	Below last contraction low	3-7%	HARD 7.5%
Power Play	Above tight range	Below tight range low	2-5%	HARD 5%
Low Cheat / 3C	Before pivot	Below base low	5-8%	HARD 8%

VCP Contraction Example

Contraction	Pullback	What It Shows
1st	20-30%	Initial correction — sellers still active
2nd	10-15%	Selling pressure decreasing
3rd	5-8%	Sellers nearly exhausted — this is the pivot zone
4th (if present)	2-3%	Ultra-tight = institutional accumulation complete

Trade Management

Entry

Buy on pivot breakout with volume. Stop below last contraction low.

Immediate

Cut loss instantly at stop level — no hoping, no averaging down.

+20-25%

Take profits (3:1 ratio with 7-8% stop). Unless showing exceptional momentum.

Distribution

Sell if stock shows distribution signs after significant advance.

Trendline break

Sell if stock breaks key trendline on volume.

How SetupLens Calculates It

Setup	Formula	Cap
VCP	10d_low × 0.997	if risk > 7.5% → entry × 0.925
Power Play	10d_low × 0.997	if risk > 5% → entry × 0.95
Low Cheat	10d_low × 0.995	if risk > 8% → entry × 0.92

📖

William O'Neil — CAN SLIM / IBD Methodology

Founder of Investor's Business Daily. Studied 100+ years of market winners to develop CAN SLIM. Simple, non-negotiable sell rules. The 7-8% stop loss is the most famous rule in growth stock investing.

Portfolio

4-8 Stocks

Concentrated in leading industries. Risk controlled entirely through the 7-8% stop rule, not position sizing formulas.

★ THE Rule

Always 7-8%

Written in BOLDFACE in his book. Does not reference pattern lows, MAs, or anything else. It is always and exactly 7-8% below purchase price. No excuses.

Profit Target

20-25%

Creates a 3:1 reward-to-risk ratio with the 7-8% stop. Unless stock gains 20% in under 3 weeks — then hold at least 8 weeks.

Volume Requirement

+40-50%

Breakout day volume must be 40-50%+ above average. Confirms institutional participation.

"ALWAYS, without exception, limit losses to 7% or 8% of your cost."

— William O'Neil, "How to Make Money in Stocks" (in boldface)

Stop Loss By Setup

Setup	Entry	Stop	Risk
Cup with Handle	Above handle high	8% below entry	Exactly 8%
Double Bottom	Above middle peak	8% below entry	Exactly 8%
Flat Base	Above base high	7% below entry	7% (tighter)

O'Neil's stop is ALWAYS a fixed percentage from entry. If SetupLens shows anything other than 7-8% for O'Neil, the calculation is wrong.

Trade Management

Entry

Buy at pivot point from proper base on volume. Stop exactly 7-8% below.

+20% in 3+ wks

Take profits at 20-25% gain.

+20% in <3 wks

HOLD minimum 8 weeks — exceptional strength deserves time.

Climax top

Sell on largest single-day point gain after extended advance.

50d MA break

Sell if stock closes below 50-day MA on heavy volume.

How SetupLens Calculates It

Setup	Formula	Notes
All (except flat)	entry × 0.92	Always 8%. No pattern reference.
Flat Base	entry × 0.93	7% — tighter for tight patterns.

📊

Dan Zanger — Pure Chart Pattern Trader

30,000+ hours of chart pattern study. Turned $10,775 into $42 million (Guinness record). No indicators — only price, volume, and patterns. Focuses on leading stocks from hot sectors.

Account Risk

≤ 1%

Never risk more than 1% of total portfolio on a single trade. Concentrates in leading stocks from hot sectors.

★ The 8% Rule

8% Max

Sell if stock drops 8% below purchase price. Sacrosanct. For breakouts specifically: sell quickly if stock drops below breakout point.

Chase Limit

≤ 5%

NEVER pay more than 5% above the breakout point. This is Zanger's #1 rule for entries.

Volume Threshold

+50%

Breakout volume must be 50%+ above 20-day average. Ideally 300%+ for the strongest moves.

"Stocks are only good when they are moving up."

— Dan Zanger

Stop Loss By Setup

Setup	Entry	Stop Placement	Typical Risk	Max Risk
Bull Flag	Above flag trendline	Below breakout point / flag low	5-8%	8%
Cup & Handle	Above handle high	Below breakout point	5-8%	8%
High Tight Flag	Above tight range	Just below tight range low	3-5%	5%
Ascending Base	Above resistance	Below last higher low or 20MA	5-8%	8%

Trade Management

Entry

Buy breakout on massive volume. Never more than 5% above breakout.

+15-20%

Sell 20-30% of position. Secure some gains.

Ongoing

Hold strongest stocks longest. Pyramid into winners, adding on strength.

Momentum fades

Sell stocks losing momentum or turning down. Set trailing stops.

How SetupLens Calculates It

Setup	Formula	Cap
Bull Flag	10d_low × 0.997	if risk > 8% → entry × 0.92
HT Flag	10d_low × 0.998	if risk > 5% → entry × 0.95
Ascending	max(10d_low, 20MA) × 0.997	if risk > 8% → entry × 0.92

🐝

Stockbee (Pradeep Bonde) — Momentum Burst Trader

Mentor to Qullamaggie. Targets 8-20% moves in 3-5 days (bursts) and 50%+ in weeks (pivots). Emphasizes situational awareness — only trades when market conditions favor breakouts. Edge comes from tight entries.

Risk Philosophy

Tight Entries

No published fixed % rule like O'Neil. Risk is kept tiny through entering at the exact right moment — tight consolidation points where stops are naturally close.

★ Cardinal Rule

< 3 Up Days

"Never buy after 3+ consecutive up days" — that's bag holder territory. Wait for consolidation before entering.

Trailing Stop

20d MA

Primary trailing reference once in profit. Close below 20d MA signals exit.

Market Awareness

Situational

Constantly monitors whether breakouts are working. If they're failing — stop trading entirely. Wait for conditions to improve.

"The key to making money in the market is capturing 8-20% moves in 3-5 days, over and over."

— Stockbee (Pradeep Bonde)

Stop Loss By Setup

Setup	Entry	Stop Placement	Typical Risk	Max Risk
Momentum Burst	Day 1 of next burst	Below consolidation low / 20d MA	3-5%	~7%
Anticipation	In tight range (pre-breakout)	Below narrow range low / 20d MA	2-3%	~5%
Double Trouble	On surge	Below 20d MA	3-5%	~7%

Trade Management

Pre-entry

Scan for stocks in low-momentum consolidation with narrow range bars. Enter 3:58-4:00 PM for overnight gap.

Day 1-2

Watch for burst confirmation — stock should move quickly in your favor.

Day 3-5

Momentum burst target window. Take profits on exhaustion signals.

If catalyst-driven

Episodic pivots can hold longer — 50-100% potential moves over weeks.

Always

If breakouts are failing across the board — sit on hands. Wait for market to improve.

How SetupLens Calculates It

Setup	Formula	Cap
Burst	20MA × 0.997	if risk > 7% → entry × 0.93
Anticipation	max(10d_low, 20MA) × 0.997	if risk > 5% → entry × 0.95
Double Trouble	20MA × 0.997	if risk > 7% → entry × 0.93

Stockbee's stops should almost always be the tightest of all 5 traders. If SetupLens shows Stockbee with wider risk than Minervini or Qullamaggie, something is off.

Side-by-Side Comparison

Trader	Stop Rule	Typical Risk	Hard Max	Entry Reference
Qullamaggie	Low of day, capped at 1× ATR/ADR	3-7%	≤ 1× ADR	Flag / consolidation high
Minervini	Below last VCP contraction	3-7%	7.5-8%	VCP pivot (10d high, NOT 52wk)
O'Neil	Fixed 7-8% below entry. Always.	7-8%	8% HARD	Pivot / buy point from base
Zanger	Below breakout point	5-8%	8% HARD	Breakout trendline
Stockbee	Below consolidation / 20d MA	2-5%	~8%	Consolidation high or pre-breakout

Same Stock, Different Stops

Example: Stock at $466 with 5% consolidation range, 10d high $469, 10d low $444, 20MA $459

Trader	Entry	Stop	Risk	Logic
Qullamaggie	$469	$444	5.3%	Flag low (may tighten further with ATR cap)
Minervini	$469	$444	5.3%	VCP contraction low (within 7.5% cap)
O'Neil	$469	$431	8.0%	Iron 8% rule — always, no exceptions
Zanger	$469	$444	5.3%	Breakout point / flag low
Stockbee	$469	$459	2.1%	20MA trailing — tightest of all

O'Neil always shows 7-8%. Stockbee almost always shows the tightest stop. Q, Minervini, and Zanger converge when patterns are tight — this is expected behavior, not a bug.

Key Takeaways

Tightest Stops

Stockbee

Edge comes from entering at the exact right moment. 20MA reference keeps stops naturally close. Best for experienced traders who can nail timing.

Widest (But Simplest)

O'Neil

Always 7-8%. No thinking required. Best for beginners or systematic traders who want a simple, mechanical rule. Battle-tested over 100+ years of data.

Volatility-Adjusted

Qullamaggie

ATR cap adapts to each stock's personality. A 2% ADR stock gets a 2% stop; an 8% ADR stock gets 8%. Dynamic and sophisticated.

Pattern-Dependent

Minervini

VCP tightness directly determines risk. A proper 3rd contraction gives 3-5% risk naturally. If risk exceeds 7.5%, the pattern simply isn't ready.

Risk Management Rules

Kristjan Kullamägi — Momentum Swing Trader

Stop Loss By Setup

Trade Management Timeline

How SetupLens Calculates It

Mark Minervini — SEPA Methodology

Stop Loss By Setup

VCP Contraction Example

Trade Management

How SetupLens Calculates It

William O'Neil — CAN SLIM / IBD Methodology

Stop Loss By Setup

Trade Management

How SetupLens Calculates It

Dan Zanger — Pure Chart Pattern Trader

Stop Loss By Setup

Trade Management

How SetupLens Calculates It

Stockbee (Pradeep Bonde) — Momentum Burst Trader

Stop Loss By Setup

Trade Management

How SetupLens Calculates It

Side-by-Side Comparison

Same Stock, Different Stops

Key Takeaways