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Today’s interview dives into Troy Bombardia—quantitative trader and data-driven market researcher—whose work zeroes in on the S&P 500 using a clean, rules-first process. Recorded on the Desire To Trade podcast, this conversation unpacks how Troy went from shorting financials during ’08 to building a robust, long-term model that times only the highest-probability slices of uptrends. He’s big on avoiding the riskiest “final eighth,” cutting portfolio volatility, and keeping life simple enough to trade and travel without babysitting screens.
In this piece, you’ll learn Troy’s core playbook: when he presses, when he steps aside, and how he blends fundamentals (bear market detection, macro “money flow” into/out of the U.S.) with straightforward technical triggers to catch the easiest part of each rally. We’ll hit his stance on using leveraged index ETFs responsibly, defining bull vs. bear the practical way, adapting to currencies without getting chopped, and building a patient routine that favors conviction over churn. Expect clear takeaways you can test, apply, and scale—without turning trading into a full-time fire drill.
Troy Bombardia Playbook & Strategy: How He Actually Trades
Market Regime: Trade Only the Easy Part of Bull Trends
He focuses on catching the middle, high-probability slice of uptrends and sidestepping the messy parts. This section lays out how he defines bull vs. bear, and when he’s allowed to play offense.
- Treat the S&P 500 as the primary “engine”; ignore most single-stock noise.
- Only trade long when a bull regime is confirmed by price + breadth (e.g., index above a rising 200-day and a majority of components above their 50-day).
- Stand down when breadth deteriorates and the index loses the 200-day with slope flattening or turning down.
- Require a fresh bullish confirmation after every >8–10% correction before re-engaging.
- Skip the first bounce of a potential new bull; wait for higher high + higher low to prove the turn.
Entries: Simple Triggers, No Heroics
Entries are mechanical and chosen to piggyback on institutional momentum. Below are straightforward triggers that keep you on the right side without prediction.
- Buy on pullbacks to the 20–50 day area during a confirmed bull regime after a bullish reversal day or close back above the 20-day.
- Allow breakouts only when breadth confirms (e.g., >70% of index components above their 20-day) and volatility is declining.
- Use time-of-week timing: prefer entries late week when whipsaws are obvious (Friday close) or early week after a clean reclaim.
- Avoid buying after a 3-to-5 day vertical spike; let price digest for at least 1–3 days first.
- If a setup fails to trigger within 5 trading days, cancel it—no chasing.
Exits: Systematic, Not Emotional
Exits are based on loss containment and giving winners room without clinging to the “final eighth.” Here’s the rule set to bank gains and cut losers.
- Initial stop: below the most recent swing low or 2×ATR(14) from entry, whichever is wider.
- Trail stops only after price makes a higher high; move to breakeven once gain >1.0× initial risk.
- Scale out 50% after +2R; let the rest ride with a trailing stop under the 20-day EMA.
- Hard exit if the index closes below the 50-day for 2 consecutive days during your trade.
- Do not re-enter the same ticker within 48 hours of a stop-out unless the regime filter re-confirms.
Position Sizing: Volatility-Targeted, Not Guesswork
Sizing is volatility-aware, so one bad day doesn’t wreck the account. Use these rules to keep drawdowns boring.
- Risk a fixed 0.5%–1.0% of equity per position; never more than 2% on the entire book.
- Size using ATR: Shares = (Account × Risk%) ÷ (ATR × k), with k≈1.8–2.2 depending on index volatility.
- When VIX > 25, cut all new position sizes by 50%.
- Cap total net exposure at 100% in normal conditions; allow up to 150% only in strong bulls with falling volatility and broad confirmation.
- If rolling 20-day portfolio volatility > your target (e.g., 12% annualized), reduce positions by 20% across the board.
Instruments: Keep It Clean with Index Products
He optimizes for simplicity and liquidity. These rules help mirror the approach without getting spread to death.
- Prefer highly liquid index ETFs/futures (e.g., S&P 500 futures or large-cap index ETFs).
- Use leveraged ETFs only in confirmed bull regimes and only for swing periods; never hold them through regime transitions.
- Avoid thin, story-driven names; edge is in the index + breadth, not narrative.
- For currency or global equity tilts, require both local-market confirmation and a strong USD/FX tailwind instead of forcing trades.
Breadth & Confirmation: Don’t Rely on One Signal
Single indicators fail; clusters work. These checks reduce false positives before you press the button.
- Require at least two of three: rising 200-day, >60% components above their 50-day, new highs outnumber new lows.
- Add a credit-spread check: widening high-yield spreads = reduce risk or stand down.
- Look for a thrust after a correction: two strong up closes with expanding up volume validate a turn.
- If any one pillar breaks (trend, breadth, or credit), cut exposure by one-third until repaired.
Bear Market Playbook: Capital Preservation First
When the wind’s in your face, step aside. Here’s how to recognize and behave in adverse regimes.
- No new longs when the price is below a falling 200-day and breadth is deteriorating.
- Use countertrend longs only for tactical 3–10 day oversold bounces with half-size risk.
- Focus on cash and very short holding periods; avoid leverage entirely.
- Tighten stops (1.5×ATR) and shorten profit targets (1–1.5R).
- If max drawdown exceeds your threshold (e.g., 8%), halt trading for 5 sessions and review.
Weekly Routine: Process Over Predictions
He trades a schedule, not headlines. This routine keeps decisions objective and time-efficient.
- Weekend: run regime checks (trend, breadth, credit), pre-build a watchlist with entry prices, stops, and sizes.
- Monday pre-open: adjust sizes based on new volatility and any breadth changes.
- Midweek: add only if initial trades are working and regime is intact; avoid adding after midweek if exposure is already >75%.
- Friday: prune laggards that closed below the 20-day; trim winners stretched >3ATR above the 20-day.
- Once per month: rebalance exposure back to target volatility.
Risk Controls: Hard Limits Prevent Hard Lessons
Rules are only as good as your brakes. Use these account-level checks to prevent small leaks from becoming holes.
- Daily loss limit: stop trading for the day at −1.5% of equity; for the week at −3%.
- No adding to losers—ever. New ads only on fresh signals with new stops.
- If three consecutive trades end −R or worse, cut all sizes by 50% until two winners occur.
- Cap correlated positions: treat all S&P-linked exposure as one trade for risk limits.
- Keep a caa sh buffer (10%+) for flexibility during sudden breadth thrusts.
Scaling & Leverage: Earn the Right to Press
Pressing is conditional, not impulsive. These rules help you scale responsibly when the wind is truly at your back.
- Add only after the initial position is >+1R and regime + breadth remain strong.
- Each add = 50% of the prior size; place its stop independently.
- Permit temporary leverage only when VIX < 18, 200-day rising, and up-volume persists for multiple sessions.
- De-lever quickly on a close below the 20-day or if the advance-decline rolls over for 3 sessions.
Trade Management: What to Do After You’re In
Managing winners is as important as picking them. Keep it mechanical with these guardrails.
- After +2R open profit, trail with a stop under the 20-day; switch to 10-day if VIX spikes > 5 pts in a week.
- Take partial profits into 3–5 day surges; re-enter only after a proper pullback signal.
- If price gaps above target by >1ATR, book at least one-third immediately.
- If you’re stopped at breakeven after +1R, allow one re-try only if breadth stays supportive.
Psychology & Tracking: Data Beats Memory
Staying calm comes from knowing your numbers. These habits keep the edge repeatable.
- Maintain a rolling dashboard: win rate, average R, expectancy, time-in-trade, and regime at entry.
- Tag every trade by regime (bull, transition, bear) and setup type (pullback, breakout).
- Review only weekly; during sessions, follow the checklist—no new “ideas” mid-day.
- Pre-commit “If/Then” statements (e.g., “If SPX closes below 50-day twice, then cut exposure 50% next open”).
- Keep a maximum open position limit (e.g., 3) to ensure focus and execution quality.
Optional Global & FX Tilt: Only with Tailwinds
Broad indices remain the core, but he allows tactical tilts when multiple edges align. Use these rules to avoid style drift.
- Trade country ETFs only when both local trend and USD cross support the move.
- Require breadth confirmation inside that market (e.g., >60% components above 50-day).
- Use half-size initial risk for non-U.S. exposures; promote to full size only after profits > +1R and volatility normalizes.
- Exit on any USD reversal that negates the tailwind or if the local index loses its 200-day.
Trade the Middle of Bull Trends, Skip the Final Eighth
Troy Bombardia keeps it simple: capture the easy, obvious part of a confirmed uptrend and ignore the flashy edges. He wants the index above a rising long-term average with healthy breadth before he even considers pressing the long button. That way, he’s trading with institutions, not guessing tops and bottoms. By refusing to time the first bounce or the last gasp, he avoids the drama and the drawdowns.
For Troy Bombardia, the goal isn’t to be right at extremes—it’s to be paid in the middle. He waits for a higher high and higher low after a correction, then enters on a clean reclaim rather than a hope-filled poke. If momentum stretches too far in a few sessions, he lets it cool before adding, because parabolic candles love to mean-revert. The edge is consistency: trade strong trends, manage risk tightly, and let the middle of the move do the heavy lifting.
Size Positions by Volatility so One Bad Day Can’t Kill You
Troy Bombardia treats position sizing as the first line of defense, not an afterthought. He scales exposure up or down based on actual market volatility, so a routine swing doesn’t become a portfolio crisis. Using measures like ATR or realized volatility, he converts chaos into a consistent dollar risk per trade. That lets him stay aggressive in calm regimes and automatically conservative when markets get jumpy.
For Troy Bombardia, risk is a budget, not a vibe. He risks a small, fixed slice of equity per position and adjusts share count to the instrument’s current volatility so each trade carries similar pain potential. When the VIX spikes or breadth deteriorates, he cuts size across the board rather than pretending his edge is unchanged. By capping correlated exposure and refusing to pyramid recklessly, he ensures survivability comes before victory laps.
Use Breadth and Trend Filters Before Entries, Not Gut Predictions
Troy Bombardia won’t touch a long until the trend and the crowd both say “green.” He wants a price above a rising long-term average and a clear majority of components in gear, not a lone index pop. Breadth thrusts, expanding up days, and new highs consistently beating new lows tell him institutions are actually buying. Those checks keep him from guessing turns just because a chart “looks bottomy.”
For Troy Bombardia, filters are brakes and steering, not decorations. If the trend weakens or breadth rolls over, he cuts risk or stands down—even when a setup looks tempting. He waits for a higher high and a higher low after a correction, then lets breadth reconfirm before pressing. The result is fewer trades, fewer whipsaws, and entries that ride flows instead of fighting them.
Diversify by Timing, Exposure, and Instruments, Not Endless New Ideas
Troy Bombardia keeps diversification practical: stagger entries, vary holding lengths, and spread exposure across uncorrelated instruments, instead of collecting dozens of half-baked setups. He treats the S&P as the core engine, then layers complementary pieces—like a second index or a currency tilt—only when regimes align. This way, a single bad swing in one timeframe or product doesn’t drag the whole account underwater. Diversification is about risk paths, not trophy tickers.
For Troy Bombardia, the rule is “different edges, same process.” He staggers buys across a few sessions, scales with volatility, and caps correlated exposure so the book doesn’t secretly behave like one trade. If a new instrument can’t pass his trend and breadth filters, it doesn’t get a slot—no exceptions. He’d rather hold three clean, uncorrelated positions than ten overlapping ones that all move together. That’s how diversification actually smooths equity curves instead of just creating busywork.
Mechanical Exit Rules: Trail Winners, Cut Losers, Respect Regimes
Troy Bombardia treats exits as preplanned, not negotiated. He sets the initial stop beyond obvious noise—recent swing low or about 2×ATR from entry. When a trade reaches +1R, he reduces risk by moving to breakeven after a higher high. Into strength, he scales a portion at +2R and lets the rest run behind a 20-day trailing stop. If the index closes below the 50-day for two sessions during the trade, he’s out, no debate.
Troy Bombardia won’t chase the “final eighth,” preferring to hand back a little to keep the equity curve smooth. If volatility spikes or breadth flips, he tightens the trail or cuts size even if the price hasn’t hit the stop. After a stop-out, he waits for the regime filter to reconfirm before any re-entry, avoiding revenge trades. The goal is simple: bank profits systematically, cut losers quickly, and let rules—not adrenaline—decide the destination.
Troy Bombardia’s big takeaway is disarmingly simple: stop trying to be a hero and get paid for the easy part. He builds around the S&P 500 and only presses when the market proves it—trend up, participation broad, pullbacks orderly—then he rides the middle of the move and refuses to chase the “final eighth.” That discipline shows up everywhere: he closed the outside-capital chapter, runs a lean family-office style book, and structures his routine so he can travel without babysitting screens. The theme never changes—objective signals first, comfort with missing edges, and a default to cash when conditions slip.
Under the hood, Troy Bombardia treats risk as a budget and volatility as the exchange rate. Position size flexes with ATR and the backdrop (think: cut size when things get jumpy, never let correlated exposure masquerade as diversification). Entries wait for confirmation—higher high, higher low, reclaim of key moving averages with breadth in gear; exits are preplanned—initial stop beyond noise, partials into strength, trailing stop to avoid overstaying. In bears or regime transitions, he stands down or goes tactical for short windows only, preferring capital preservation over clever calls. The result is a process that’s robust, boring-in-the-best-way, and repeatable: trade strong trends, size by volatility, diversify by timing and instrument—not ideas—and let rules, not predictions, do the heavy lifting.
