End of Day Reversal Trade

Entry Logic

• Enter long a stock that has been selling off all day and then reverses in the last hour of trading.
• Confirmation is a strong bullish candle in the last 30 minutes of the day.
• Use a 5-minute timeframe for this setup.
• Entry should be above the high of the reversal candle.
• This setup works best on a strong market day.

Exit Logic

• The profit target is the opening price of the day.
• Take full profits at the target.
• No trailing stop is used.
• Exit if the stock makes a new low for the day.
• Exit on a confirmed bearish reversal pattern.
• Hold the trade overnight and exit at the open the next day.

Stop Loss Structure

• Place a hard stop below the low of the day.
• No soft stop is used.
• Maximum dollar loss is $500 per trade.
• Maximum percent loss is 1% of the account.
• The structural stop is the low of the day.

Risk Management Framework

• Risk 0.75% of the account per trade.
• Daily loss limit is 2.25% of the account.
• Weekly loss limit is 5% of the account.
• Maximum drawdown is 15%.
• Minimum risk-reward ratio is 2:1.

Position Sizing Model

• Use a fixed fractional sizing model.
• No volatility adjustment is needed.
• Use 1.5x size for A+ setups.
• Do not scale into trades.
• Do not scale out.

Trade Filtering

• Avoid trading this setup on weak market days.
• Requires a clear reversal in the last hour of trading.
• Trade only stocks that are in a long-term uptrend.
• Avoid trading this setup on stocks that have gapped down.
• Do not trade in choppy, sideways markets.

Context Framework

• The daily chart should show a clear uptrend.
• The market should be strong on the day.
• The setup should occur after a morning sell-off.
• The weekly chart should show a bullish bias.

Trade Management Rules

• Do not move the stop to breakeven.
• Take full profits at the target.
• Do not add to winning trades.
• This is an overnight swing trade.

Time Rules

• The optimal time to enter this trade is in the last 30 minutes of the trading day.
• The trade is exited at the open of the next day.

Setup Classification

• A+ setup: Strong reversal in the last 30 minutes, high volume, strong market day.
• A setup: Clear reversal in the last hour, moderate volume, strong market day.
• B setup: Weak reversal, low volume, neutral market day.
• C setup: No clear reversal, avoid.

Market Selection Criteria

• Trade large-cap stocks that are in a strong uptrend.
• The stock should have a high level of liquidity.
• The stock should have a history of closing strong.

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 stock gaps down the next day.
• A common failure is a failure to follow through on the reversal at the open.

Psychological Rules

• Have the discipline to hold the trade overnight.
• Do not be afraid of the overnight risk.

Advanced Components

• Use a market-on-close order to get a better entry price.
• A news check can help avoid holding a stock with pending news overnight.
• Avoid trading this setup on multiple correlated stocks.
• The daily chart must confirm the uptrend.

Location

• The setup is strongest on a strong market day after a morning pullback.
• The setup is weakest on a weak market day.
• The strength of the overall market is key to the success of this trade.