Marubozu Momentum Entry

Entry Logic

• Exact entry trigger: Buy on the open of the next candle after a Bullish Marubozu candle closes.
• Confirmation requirements: The Marubozu candle has no wicks, or very small wicks. It should be a long-bodied candle. Volume should be high.
• Timeframe required: 5-minute chart.
• Location context: The pattern should occur at the beginning of a new trend or as a breakout from a consolidation.
• Market condition requirement: A market that is starting to trend strongly.

Exit Logic

• Profit target(s): A measured move target.
• Scaling out rules: N/A.
• Trailing stop rules: Use a fast EMA as a trailing stop.
• Exit on signal failure: A close below the midpoint of the Marubozu.
• Exit on opposite signal: A Bearish Marubozu.
• Exit on time expiration: If momentum stalls.
• Exit on momentum loss: Small candles after entry.

Stop Loss Structure

• Hard stop location: Below the low of the Marubozu.
• Soft stop rules: N/A.
• Maximum dollar loss per trade: 0.5% of capital.
• Maximum percent loss per trade: N/A.
• Structural stop placement: Below the breakout level.

Risk Management Framework

• Risk per trade: 0.5%.
• Maximum daily loss limit: 1.5%.
• Maximum weekly loss limit: 4%.
• Maximum drawdown allowed: 10%.
• Risk-reward ratio requirement: 1:3.

Position Sizing Model

• Recommended sizing approach: Fixed risk.
• Volatility-based adjustment: N/A.
• Conviction-based sizing (A+/A/B setup): A+ for a Marubozu breaking out of a major base. A for a breakout from a smaller consolidation. B for a Marubozu with smaller body.
• Scaling in rules: N/A.
• Scaling out rules: N/A.

Trade Filtering

• Market conditions to avoid: Choppy markets.
• Specific setups required: A clear Marubozu candle.
• Stock/instrument requirements: High-beta stocks.
• Time of day restrictions: First hour of trading.
• Chop/news avoidance rules: N/A.

Context Framework

• Trend direction assessment: The beginning of a new trend.
• VWAP relationship: Price should be breaking above VWAP.
• Moving average relationship: Price should be breaking above key moving averages.
• Range location: Breaking out of a range.
• Higher timeframe alignment: The hourly chart should support a bullish bias.

Trade Management Rules

• When to move stop to breakeven: After a 1R move.
• When to scale out: N/A.
• When to add size: N/A.
• How to handle fast moves vs slow moves: This is a fast move strategy.

Time Rules

• Optimal trading window: 9:30 AM - 10:30 AM EST.
• Times to avoid: Midday.
• Session-specific notes: N/A.

Setup Classification

• A+ setup criteria: A massive Marubozu with huge volume breaking a major resistance.
• A setup criteria: A standard Marubozu with good volume.
• B setup criteria: A Marubozu with small wicks.
• C setup criteria (avoid): A Marubozu against the primary trend.

Market Selection Criteria

• Instrument requirements: Volatile stocks.
• Volume/liquidity requirements: High volume.
• Volatility requirements: High ATR.

Statistical Edge Metrics

• Expected win rate: 45-50%
• Average win size: 3.5R
• Average loss size: 1R
• Profit factor: 1.5 - 1.8
• Expectancy per trade: 0.5R.

Failure Conditions

• Market conditions where strategy fails: When a trend is exhausted.
• Specific scenarios to avoid: Chasing a Marubozu that has already moved too far.

Psychological Rules

• Key mental discipline requirements: Quick execution.

Advanced Components

• Market regime detection: N/A.
• Volatility/liquidity filters: N/A.
• Correlation filters: N/A.
• Multi-timeframe alignment: The signal should be in the same direction as the trend on the next two higher timeframes.

Location

• Where this setup is strongest: As a breakout pattern.
• Where this setup is weakest: In a choppy market.
• Location changes outcome: Yes.