ETF Arbitrage Scalp

Entry Logic

• Exact entry trigger: A temporary price discrepancy between an ETF and its underlying assets.
• Confirmation requirements: The discrepancy is large enough to cover transaction costs and generate a profit.
• Timeframe required: 1-minute or tick chart.
• Location context: N/A.
• Market condition requirement: A volatile market where price discrepancies are more likely to occur.

Exit Logic

• Profit target(s): The price discrepancy closes.
• Scaling out rules: No scaling out.
• Trailing stop rules: No trailing stop.
• Exit on signal failure: If the price discrepancy does not close within a few minutes, exit the trade.
• Exit on opposite signal: N/A.
• Exit on time expiration: Exit the trade after 5 minutes, regardless of the outcome.
• Exit on momentum loss: N/A.

Stop Loss Structure

• Hard stop location: A small, pre-defined loss.
• Soft stop rules: None.
• Maximum dollar loss per trade: $50.
• Maximum percent loss per trade: 0.5% of the account.
• Structural stop placement: N/A.

Risk Management Framework

• Risk per trade: 0.25% of the account.
• Maximum daily loss limit: 3 consecutive losing trades.
• Maximum weekly loss limit: 5% of the account.
• Maximum drawdown allowed: 10% of the account.
• Risk-reward ratio requirement: N/A.

Position Sizing Model

• Recommended sizing approach: Fixed dollar amount.
• 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 stable market with low volatility.
• Specific setups required: A clear price discrepancy between an ETF and its underlying assets.
• Stock/instrument requirements: Liquid ETFs and their underlying components.
• 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: N/A.
• When to scale out: N/A.
• When to add size: N/A.
• How to handle fast moves vs slow moves: This is a very short-term strategy that requires quick execution.

Time Rules

• Optimal trading window: N/A.
• Times to avoid: N/A.
• 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 price discrepancy is too small to be profitable.

Market Selection Criteria

• Instrument requirements: Liquid ETFs and their underlying components.
• Volume/liquidity requirements: The instruments must be highly liquid to ensure immediate execution.
• Volatility requirements: The instruments must be volatile enough to create price discrepancies.

Statistical Edge Metrics

• Expected win rate: 90%.
• Average win size: $0.05.
• Average loss size: $0.02.
• Profit factor: 2.25.
• Expectancy per trade: $0.04.

Failure Conditions

• Market conditions where strategy fails: A stable market with low volatility.
• Specific scenarios to avoid: Trading illiquid ETFs.

Psychological Rules

• Key mental discipline requirements: The ability to act instantly and without hesitation.

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 volatile markets.
• Where this setup is weakest: In stable markets.
• Location changes outcome: N/A.