ATR Expansion Breakout

Entry Logic

Trigger: Price breaks above/below a key resistance/support level. Confirmation: Current 5-minute candle ATR is 1.5x the average 10-period ATR. Timeframe: 15-minute chart for levels, 5-minute for entry. Location: Breakout from a significant daily level. Market Condition: Trending market or transition from range.

Exit Logic

Profit Target: 3 ATR from entry. Scaling Out: Scale 40% at 1.5R, 60% at 3R. Trailing Stop: Trailing 1.5 ATR below/above price. Signal Failure: Price closes back below/above the breakout level. Time Expiration: Close all positions after 2 hours if target not hit. Momentum Loss: Close if price stalls for 3 consecutive candles.

Stop Loss Structure

Hard Stop: 1 ATR beyond the breakout level, opposite direction. Soft Stop: Price fails to hold the breakout after 2 candles. Max Dollar Loss: $275 per trade. Max Percent Loss: 0.65% of account. Structural Stop: Below/above the breakout candle's low/high.

Risk Management Framework

Risk Per Trade: 1.3% of account. Daily Limit: 3.8% max loss. Weekly Limit: 8.5% max loss. Max Drawdown: 13% from peak equity. R:R Requirement: Minimum 1:2.5.

Position Sizing Model

Sizing Approach: Volatility-adjusted fixed risk. Volatility Adjustment: Share size inversely proportional to ATR. Conviction Sizing: No conviction sizing. Scaling In/Out: Scale out as per exit logic.

Trade Filtering

Market Conditions: Avoid low volatility, choppy markets. Setups: Clear support/resistance levels. Instruments: Highly liquid stocks, futures. Time Restrictions: Avoid market close. Chop/News Avoidance: No trades during earnings.

Context Framework

Trend Direction: Breakout aligns with higher timeframe trend. VWAP Relationship: Price breaking away from VWAP. MA Relationship: Price breaking above/below MAs. Higher TF: Daily chart shows clear levels.

Trade Management Rules

Breakeven: Move stop to breakeven at 1R. Scale Out: As per exit logic. Add Size: Never add to a losing trade. Fast vs Slow Moves: Use tighter stops on fast, impulsive moves.

Time Rules

Optimal Window: 9:30 AM - 11:00 AM EST, 2:30 PM - 3:45 PM EST. Times to Avoid: Lunch hour. Session Notes: High volatility at market open/close.

Setup Classification

A+/A/B/C Criteria: A+: High volume, strong ATR expansion, clear level. A: Good volume, decent ATR expansion. B: Moderate volume, slight ATR expansion. C: Low volume, weak ATR.

Market Selection Criteria

Instruments: ES, NQ, RTY, Crude Oil. Volume: High daily volume. Volatility: ATR (14) > 1.0% of instrument price.

Statistical Edge Metrics

Win Rate: 48%. Avg Win: 2.8R. Avg Loss: 1R. Profit Factor: 1.5. Expectancy: 0.34R per trade.

Failure Conditions

Strategy Fails: False breakout. ATR expansion not sustained. Overall market loses momentum.

Psychological Rules

Mental Discipline: Trust the ATR signal. Avoid overtrading. Stay disciplined.

Advanced Components

Regime Detection: Use VIX to confirm volatility regime. Filters: Volume filter, momentum oscillator. Correlation: Avoid highly correlated assets. MTF Alignment: 15-min levels, 5-min entry, daily trend.

Location

Strongest: After a period of tight consolidation. Weakest: During periods of low, sustained volatility.