Support/Resistance Flip Reversal

Entry Logic

• Enter long when a previous resistance level is broken and then successfully retested as support.
• Confirmation is a bullish candlestick pattern on the retest.
• Use a 1-hour timeframe for this setup.
• Entry should be above the high of the confirmation candle.
• This setup works best in a trending market.

Exit Logic

• The profit target is the next resistance level.
• Scale out 50% at the target.
• Trail the remaining position with the 20-period EMA.
• Exit if price closes back below the flipped level.
• Exit on a confirmed bearish reversal pattern.
• Exit if the trade is not profitable within 5 days.
• Exit if the MACD shows a bearish crossover.

Stop Loss Structure

• Place a hard stop below the flipped level.
• A soft stop is a close below the 20-period EMA.
• Maximum dollar loss is $700 per trade.
• Maximum percent loss is 1.4% of the account.
• The structural stop is below the low of the confirmation candle.

Risk Management Framework

• Risk 1% of the account per trade.
• Daily loss limit is 3% of the account.
• Weekly loss limit is 7% of the account.
• Maximum drawdown is 20%.
• Minimum risk-reward ratio is 2:1.

Position Sizing Model

• Use a fixed fractional sizing model.
• Adjust size based on the distance to the stop loss.
• Use 1.5x size for A+ setups.
• Do not scale into trades.
• Scale out at the target.

Trade Filtering

• Avoid trading this setup in a ranging market.
• Requires a clear break and retest of a support/resistance level.
• Trade only instruments that respect technical levels.
• Avoid trading this setup during low-volume hours.
• Do not trade in choppy, sideways markets.

Context Framework

• The daily chart should show a clear trend.
• Price should be trading above the 50-day SMA.
• The setup should occur at a significant horizontal level.
• The weekly chart should show a bullish bias.

Trade Management Rules

• Move the stop to breakeven after price has moved 1R in your favor.
• Scale out 50% at the target.
• Do not add to winning trades.
• Be patient and let the trend resume.

Time Rules

• The optimal time to trade this setup is during the main session of the instrument.
• Avoid trading this setup on Fridays.
• The trade can last for several days.

Setup Classification

• A+ setup: Clear break and retest, strong confirmation candle, high volume.
• A setup: Clear break and retest, moderate confirmation candle, average volume.
• B setup: Messy break and retest, no clear confirmation, low volume.
• C setup: No clear setup, avoid.

Market Selection Criteria

• Trade stocks, forex, and commodities.
• The instrument should have a history of respecting technical levels.
• The instrument should have a high level of liquidity.

Statistical Edge Metrics

• Expected win rate is 70%.
• Average win is 2.5R.
• Average loss is 1R.
• Profit factor is 1.75.
• Expectancy per trade is 0.75R.

Failure Conditions

• The strategy fails if the retest fails and price breaks back below the level.
• A common failure is a false breakout of the confirmation candle.

Psychological Rules

• Have the patience to wait for the retest.
• Do not chase the initial breakout.

Advanced Components

• Use a volume profile to identify the strength of the support/resistance level.
• A trend strength indicator can help confirm the trend.
• Avoid trading this setup on correlated instruments.
• The daily chart must confirm the trend.

Location

• The setup is strongest when it occurs at a major daily or weekly level.
• The setup is weakest at minor intraday levels.
• The significance of the flipped level is key to the success of the trade.