Gap and Go Long

Entry Logic

• Exact Entry Trigger: Enter long on a buy-stop order 1 cent above the high of the first 1-minute candle after the market opens, following a significant gap up.
• Confirmation Requirements: Pre-market volume must be at least 200% of its 10-day average. The first 1-minute candle must be bullish and close in its upper 25%.
• Timeframe Required: 1-minute chart for entry, 5-minute chart for context.
• Location Context: Entry must occur above the pre-market high and above the daily VWAP.
• Market Condition Requirement: Strongly trending bull market or a stock with a specific bullish catalyst.

Exit Logic

• Profit Target(s): First target at 1R. Second target at 2R. Final target at the next key resistance level.
• Scaling Out Rules: Sell 50% at 1R, 30% at 2R, and let the remaining 20% run with a trailing stop.
• Trailing Stop Rules: Use the 9-period EMA on the 1-minute chart as a trailing stop after the first target is hit.
• Exit on Signal Failure: Exit immediately if the price closes below the low of the first 1-minute candle.
• Exit on Opposite Signal: Not applicable for this momentum strategy.
• Exit on Time Expiration: Close the position if it has not reached its first target within 60 minutes.
• Exit on Momentum Loss: Exit if volume dries up and price action becomes choppy for 10 consecutive minutes.

Stop Loss Structure

• Hard Stop Location: Place a hard stop 1 cent below the low of the first 1-minute candle.
• Soft Stop Rules: None. Use a hard stop only.
• Maximum Dollar Loss: Adhere to the 1% account risk rule.
• Maximum Percent Loss: The stop loss should not exceed 2% of the stock's price.
• Structural Stop Placement: The low of the opening 1-minute candle serves as the structural stop.

Risk Management Framework

• Risk Per Trade: Maximum 1% of trading capital.
• Maximum Daily Loss Limit: 3% of trading capital.
• Maximum Weekly Loss Limit: 6% of trading capital.
• Maximum Drawdown Allowed: 15% from peak equity.
• Risk-Reward Ratio Requirement: Minimum 1.5:1 on the initial target.

Position Sizing Model

• Recommended Sizing Approach: Calculate position size based on the distance to the stop loss and the 1% account risk rule.
• Volatility-Based Adjustment: Reduce size by 50% if the stock's ATR is more than double its 20-day average.
• Conviction-Based Sizing: Use full size for A+ setups, half size for A setups.
• Scaling In Rules: Do not scale into a winning position.
• Scaling Out Rules: As defined in the Exit Logic section.

Trade Filtering

• Market Conditions to Avoid: Avoid on days when the overall market is gapping down or showing extreme weakness.
• Specific Setups Required: Stock must have a clear catalyst (earnings, news) for the gap.
• Stock/Instrument Requirements: NASDAQ and NYSE stocks with a price above $10 and average daily volume over 2 million shares.
• Time of Day Restrictions: Only trade within the first 30 minutes of the market open.
• Chop/News Avoidance Rules: Avoid stocks with a history of erratic price action or upcoming news events.

Context Framework

• Trend Direction Assessment: The stock should be in a clear uptrend on the daily chart.
• VWAP Relationship: The stock must be trading above VWAP.
• Moving Average Relationship: The stock should be above its 20, 50, and 200-day moving averages.
• Range Location: The gap should break the stock out of a recent consolidation range.
• Higher Timeframe Alignment: The daily and weekly charts should show a clear bullish trend.

Trade Management Rules

• When to Move Stop to Breakeven: After the first profit target is hit.
• When to Scale Out: As defined in the Exit Logic section.
• When to Add Size: Never add to a winning position.
• How to Handle Fast Moves vs Slow Moves: In fast moves, use a wider trailing stop (20 EMA). In slow moves, stick to the 9 EMA.

Time Rules

• Optimal Trading Window: First 30 minutes of the US market open.
• Times to Avoid: After 10:00 AM EST, as momentum tends to fade.
• Session-Specific Notes: This strategy performs best during the New York session.

Setup Classification

• A+ Setup Criteria: Gap up with a clear catalyst, high pre-market volume, and a strong bullish close on the first 1-minute candle.
• A Setup Criteria: Gap up with a catalyst, but average pre-market volume.
• B Setup Criteria: Gap up without a clear catalyst.
• C Setup Criteria: Gap up into a key resistance level.

Market Selection Criteria

• Instrument Requirements: High-beta stocks with a history of strong momentum.
• Volume/Liquidity Requirements: Minimum 2 million shares traded daily.
• Volatility Requirements: ATR of at least 2% of the stock price.

Statistical Edge Metrics

• Expected Win Rate: 50-55%.
• Average Win Size: 2.5R.
• Average Loss Size: 1R.
• Profit Factor: 1.5 to 2.0.
• Expectancy Per Trade: +0.4R to +0.6R.

Failure Conditions

• Market Conditions Where Strategy Fails: Bear markets or choppy, range-bound markets.
• Specific Scenarios to Avoid: Gaps that are immediately faded by sellers.

Psychological Rules

• Key Mental Discipline Requirements: Avoid chasing entries. Stick to the plan. Do not widen stops.

Advanced Components

• Market Regime Detection: Use a market-wide breadth indicator to confirm bullish sentiment.
• Volatility/Liquidity Filters: Only trade stocks with a tight bid-ask spread.
• Correlation Filters: Avoid trading multiple stocks in the same sector with the same setup.
• Multi-Timeframe Alignment: Ensure the 5-minute, 15-minute, and daily charts are all aligned with the bullish bias.

Location

• Where This Setup Is Strongest: In the first 30 minutes of a bull market day.
• Where This Setup Is Weakest: In a bear market or a choppy market.
• Location Changes Outcome: A gap above all key resistance levels has a higher probability of success.