Sector Momentum Scalp

Entry Logic

• Exact entry trigger: A leading stock in a hot sector breaks out to a new high.
• Confirmation requirements: Other stocks in the same sector are also moving in the same direction.
• Timeframe required: 5-minute chart.
• Location context: The sector is showing strong relative strength.
• Market condition requirement: A trending market with clear sector rotation.

Exit Logic

• Profit target(s): 20-30 cents above the entry price.
• Scaling out rules: No scaling out.
• Trailing stop rules: No trailing stop.
• Exit on signal failure: If the stock does not continue to move in the intended direction, exit the trade.
• Exit on opposite signal: If the sector starts to reverse, 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: 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: 2:1.

Position Sizing Model

• Recommended sizing approach: Fixed share size.
• Volatility-based adjustment: N/A.
• Conviction-based sizing (A+/A/B setup): N/A.
• Scaling in rules: No scaling in.
• Scaling out rules: No scaling out.

Trade Filtering

• Market conditions to avoid: A market with no clear sector leadership.
• Specific setups required: A strong sector with a clear leader.
• Stock/instrument requirements: The leading stock in a hot sector.
• 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 sector trend.
• VWAP relationship: Enter long trades above VWAP.
• Moving average relationship: The 9 EMA should be above the 20 EMA.
• Range location: Enter trades at the breakout of a consolidation pattern.
• Higher timeframe alignment: The daily chart of the sector should be in an uptrend.

Trade Management Rules

• When to move stop to breakeven: After the price has moved 15 cents in your favor.
• When to scale out: No scaling out.
• 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, be patient and let the trade work.

Time Rules

• Optimal trading window: 9:30 AM - 11:00 AM EST.
• Times to avoid: 12:00 PM - 2:00 PM EST.
• Session-specific notes: The strategy works best during the morning session when sector themes are established.

Setup Classification

• A+ setup criteria: All entry criteria are met, and the sector is the strongest in the market.
• A setup criteria: All entry criteria are met, but the sector is not the strongest in the market.
• 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: The leading stock in a hot sector.
• Volume/liquidity requirements: The stock must have a daily volume of over 5 million shares.
• Volatility requirements: The stock must have a daily range of at least $1.

Statistical Edge Metrics

• Expected win rate: 55%.
• Average win size: $0.30.
• Average loss size: $0.15.
• Profit factor: 1.1.
• Expectancy per trade: $0.03.

Failure Conditions

• Market conditions where strategy fails: A market with no clear sector rotation.
• Specific scenarios to avoid: Chasing a stock that has already made a large move.

Psychological Rules

• Key mental discipline requirements: The ability to identify and focus on the strongest sectors.

Advanced Components

• Market regime detection: N/A.
• Volatility/liquidity filters: N/A.
• Correlation filters: N/A.
• Multi-timeframe alignment: The daily and weekly charts of the sector should be aligned.

Location

• Where this setup is strongest: In a market with strong sector rotation.
• Where this setup is weakest: In a market with no clear themes.
• Location changes outcome: N/A.