News Reaction Scalp

Entry Logic

• Exact entry trigger: A major news headline is released, and the price starts to move impulsively.
• Confirmation requirements: The move is accompanied by a massive surge in volume.
• Timeframe required: 1-minute chart.
• Location context: N/A.
• Market condition requirement: A stock with a major news catalyst.

Exit Logic

• Profit target(s): 50 cents to $1 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 30 minutes, regardless of the outcome.
• Exit on momentum loss: If the volume dries up, exit the trade.

Stop Loss Structure

• Hard stop location: 20 cents below the entry price.
• Soft stop rules: None.
• Maximum dollar loss per trade: $200.
• Maximum percent loss per trade: 2% of the account.
• Structural stop placement: Below a key support level.

Risk Management Framework

• Risk per trade: 1% of the account.
• Maximum daily loss limit: 1 losing trade.
• Maximum weekly loss limit: 2% 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): N/A.
• 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: Stocks with no news.
• Specific setups required: A major news catalyst.
• Stock/instrument requirements: Stocks that are highly sensitive to news.
• Time of day restrictions: N/A.
• Chop/news avoidance rules: N/A.

Context Framework

• Trend direction assessment: N/A.
• VWAP relationship: N/A.
• Moving average relationship: N/A.
• Range location: N/A.
• Higher timeframe alignment: N/A.

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: Immediately after a major news release.
• Times to avoid: Before a major news release.
• Session-specific notes: This strategy can be used at any time of the day.

Setup Classification

• A+ setup criteria: All entry criteria are met.
• A setup criteria: N/A.
• B setup criteria: N/A.
• C setup criteria: The news is not significant enough to move the stock.

Market Selection Criteria

• Instrument requirements: Stocks in the news.
• Volume/liquidity requirements: The stock must have a surge in volume after the news release.
• Volatility requirements: The stock must have a significant increase in volatility after the news release.

Statistical Edge Metrics

• Expected win rate: 40%.
• Average win size: $1.00.
• Average loss size: $0.30.
• Profit factor: 1.33.
• Expectancy per trade: $0.10.

Failure Conditions

• Market conditions where strategy fails: The news is already priced in.
• Specific scenarios to avoid: Fading a strong news-driven move.

Psychological Rules

• Key mental discipline requirements: The ability to remain calm and objective in a highly emotional market.

Advanced Components

• Market regime detection: N/A.
• Volatility/liquidity filters: N/A.
• Correlation filters: N/A.
• Multi-timeframe alignment: N/A.

Location

• Where this setup is strongest: In stocks with unexpected and significant news.
• Where this setup is weakest: In stocks with minor or expected news.
• Location changes outcome: N/A.