One of the principles behind building a large database of robust breakout strategies is finding good, sound points of initiation. The entry level matters — but the point you’re measuring from matters just as much.
This is the thinking behind the L.O.D. strategy: using the low of day as the point of initiation for index breakout trades. It’s a simple, logical idea that produces surprisingly robust results across multiple index futures markets.
Watch the full video below, then read on for the complete breakdown.
The Core Idea: Low of Day as Point of Initiation
Most breakout strategies calculate their entry level from some fixed reference point — yesterday’s close, the opening range, a moving average. The L.O.D. strategy uses the low of the current trading day as the reference point.
The logic is straightforward: once an index is in an uptrend and makes an intraday correction down to a new low of day, that low represents a well-defined, meaningful level. If the market bounces off that low with enough momentum to break through a volatility-adjusted level above it, you’re catching the continuation of the uptrend right at the point where it resumes.
It’s a bounce-and-continuation trade, with the low of day providing a clean, unambiguous reference that updates throughout the session.
How the Strategy Is Built
The construction is simple:
- Point of initiation: Low of the current trading day (updates in real time as new lows are made)
- Breakout level: Low of day + volatility multiplier (optimise the volatility calculation for your market and time frame)
- ADX filter: Only take trades when ADX is above a calibrated threshold — this filters out choppy, low-momentum conditions where breakout strategies tend to fail
- Time filter: Only enter after 9:30 AM — the pre-market period is excluded
- Exit: End of day (this is a day trading strategy), with a volatility-based stop loss for protection during the trade
The time frame is 20-minute bars, with daily data used as the second time frame for the ADX calculation. Dual time frame strategies — where the entry logic runs on an intraday bar but a filter is applied from daily data — are a consistently productive pattern in systematic index trading.
Why ADX Works So Well Here
ADX (Average Directional Index) measures trend strength without indicating direction. In the context of a breakout strategy, it’s a powerful filter: you only want to be taking breakout trades when there’s genuine directional momentum behind the market. In choppy, sideways conditions, breakouts fail more frequently — ADX helps filter those out before they become losing trades.
In the BTA hedge fund, ADX has been calibrated across all major index futures markets. The threshold values that emerge from this calibration process are robust — they hold up across different markets and different time periods. For the L.O.D. strategy specifically, the ADX filter is applied on daily data, so you’re checking whether the overall daily trend is strong enough before taking intraday entries.
Multi-Market Robustness
One of the hallmarks of a genuinely robust strategy is that the core logic works across multiple related markets without fundamental changes. The L.O.D. strategy demonstrates this:
- E-mini S&P 500 (ES) — the primary market, consistent results over 10 years of backtesting from 2013
- E-mini NASDAQ 100 (NQ) — works with the same core logic, parameters adjusted for higher volatility
- E-mini Dow Jones (YM) — equally robust, providing genuine portfolio diversification
The fact that the same structural approach works on ES, NQ, and YM is strong evidence that the underlying logic — bounce from low of day, volatility-adjusted breakout level, ADX filter — captures something real about how index futures behave, not just an artefact of data mining on one specific market.
Adapting It to Your Own Markets
The L.O.D. strategy is a model — the structure and principles are sound, but the specific parameters (volatility multiplier, ADX threshold, time filter boundaries) need to be optimised for your target market and time frame using your own robustness testing procedures.
The optimisation process should follow standard robustness criteria:
- Parameters should perform across a range of values, not just at a single peak
- Results should hold up in walk-forward testing — not just in-sample optimisation
- The strategy should show consistent behaviour across different market regimes, not just in specific high-volatility or low-volatility periods
Applied correctly, the L.O.D. approach gives you a repeatable structure you can deploy across multiple index futures as separate, moderately correlated strategies — building genuine portfolio depth from a single logical framework.
For more on how systematic breakout strategies are built and validated, see Masterclass Part 1: How I Build Breakout Strategies That Actually Work and Masterclass Part 2: How I Know a Strategy Is Real.
Want to build index breakout strategies like the L.O.D. without writing code? Check out Breakout Trading PRO. It’s a structured, visual strategy builder inside BreakoutOS, powered by the proven Mr. Breakouts Formula used by thousands of traders.