Momentum Burst Scalp

Entry Logic

• Exact entry trigger: A sudden and explosive move in price, accompanied by a massive surge in volume.
• Confirmation requirements: The move breaks a key support or resistance level.
• Timeframe required: 1-minute or 5-minute chart.
• Location context: The price is breaking out of a consolidation pattern.
• Market condition requirement: High-volume, high-volatility market.

Exit Logic

• Profit target(s): 30-50 cents above the entry price.
• Scaling out rules: Scale out 50% of the position at the first profit target, and trail the rest.
• Trailing stop rules: Trail the stop loss below the low of the previous candle.
• Exit on signal failure: If the price does not continue to move in the intended direction, exit the trade.
• Exit on opposite signal: If a reversal candle appears, exit the trade.
• Exit on time expiration: Exit the trade after 15 minutes, regardless of the outcome.
• Exit on momentum loss: If the volume dries up, exit the trade.

Stop Loss Structure

• Hard stop location: 10 cents below the entry price.
• Soft stop rules: None.
• Maximum dollar loss per trade: $100.
• Maximum percent loss per trade: 1% of the account.
• Structural stop placement: Below the breakout level.

Risk Management Framework

• Risk per trade: 0.5% of the account.
• Maximum daily loss limit: 2 consecutive losing trades.
• Maximum weekly loss limit: 3% of the account.
• Maximum drawdown allowed: 5% of the account.
• Risk-reward ratio requirement: 3:1.

Position Sizing Model

• Recommended sizing approach: Volatility-based position sizing.
• Volatility-based adjustment: Adjust position size based on the Average True Range (ATR).
• Conviction-based sizing (A+/A/B setup): A+ setups get 100% size, A setups get 75%, B setups get 50%.
• Scaling in rules: No scaling in.
• Scaling out rules: Scale out 50% of the position at the first profit target.

Trade Filtering

• Market conditions to avoid: Low-volume, choppy markets.
• Specific setups required: A clear momentum burst on high volume.
• Stock/instrument requirements: High-volume stocks with a history of explosive moves.
• Time of day restrictions: Avoid trading during the midday lull.
• Chop/news avoidance rules: Avoid trading around major news events.

Context Framework

• Trend direction assessment: Trade in the direction of the 15-minute trend.
• VWAP relationship: Enter long trades above VWAP, short trades below VWAP.
• Moving average relationship: The 9 EMA should be above the 20 EMA for long trades, and below the 20 EMA for short trades.
• Range location: Enter trades at the breakout of a consolidation pattern.
• Higher timeframe alignment: The 60-minute chart should be in an uptrend for long trades, and a downtrend for short trades.

Trade Management Rules

• When to move stop to breakeven: After the first profit target is hit.
• When to scale out: At the first profit target.
• When to add size: No adding size.
• How to handle fast moves vs slow moves: In fast moves, take profits at pre-defined targets. In slow moves, trail the stop loss and let the trade run.

Time Rules

• Optimal trading window: 9:30 AM - 10:30 AM EST, and 2:30 PM - 3:30 PM EST.
• Times to avoid: 11:30 AM - 1:30 PM EST.
• Session-specific notes: The strategy works best during the morning and afternoon sessions.

Setup Classification

• A+ setup criteria: All entry criteria are met, and the higher timeframe charts are aligned.
• A setup criteria: All entry criteria are met, but the higher timeframe charts are not aligned.
• B setup criteria: Only some of the entry criteria are met.
• C setup criteria: None of the entry criteria are met.

Market Selection Criteria

• Instrument requirements: Stocks with a daily volume of over 5 million shares.
• Volume/liquidity requirements: The stock must have a tight bid-ask spread.
• Volatility requirements: The stock must have a daily range of at least $1.50.

Statistical Edge Metrics

• Expected win rate: 45%.
• Average win size: $0.60.
• Average loss size: $0.20.
• Profit factor: 1.35.
• Expectancy per trade: $0.10.

Failure Conditions

• Market conditions where strategy fails: Low-volume, choppy markets.
• Specific scenarios to avoid: Chasing moves that have already extended too far.

Psychological Rules

• Key mental discipline requirements: The ability to handle the emotional swings of large winners and losers.

Advanced Components

• Market regime detection: Use the VIX to determine the market regime.
• Volatility/liquidity filters: Only trade stocks with high volume and volatility.
• Correlation filters: Avoid trading stocks that are highly correlated with each other.
• Multi-timeframe alignment: The 5-minute, 15-minute, and 60-minute charts should all be aligned.

Location

• Where this setup is strongest: In high-volume, trending markets.
• Where this setup is weakest: In low-volume, choppy markets.
• Location changes outcome: N/A.