Volume Profile Mean Reversion (POC)

Entry Logic

• Long Entry: Price pulls back to the Volume Point of Control (POC) from above.
• Short Entry: Price rallies to the Volume Point of Control (POC) from below.
• Confirmation: A bounce or rejection at the POC.
• Timeframe: 15-minute.
• Location: At the POC for the current or previous day.
• Market Condition: Any.

Exit Logic

• Profit Target: The nearest high-volume node.
• Scaling Out: No.
• Trailing Stop: A bar-by-bar stop.
• Signal Failure: Exit if price closes through the POC.
• Opposite Signal: Not applicable.
• Time Expiration: 4-6 bars.
• Momentum Loss: Exit if price stalls at the POC.

Stop Loss Structure

• Hard Stop: Just beyond the POC.
• Soft Stop: A close through the POC.
• Max Dollar Loss: $500.
• Max Percent Loss: 1%.
• Structural Stop: Beyond the POC and any associated price structure.

Risk Management Framework

• Risk Per Trade: 0.75%.
• Daily Limit: 3 trades.
• Weekly Limit: 4%.
• Max Drawdown: 12%.
• R:R Requirement: 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: No.
• Conviction Sizing: No.
• Scaling In: No.
• Scaling Out: No.

Trade Filtering

• Market Conditions: Best in markets that are creating clear volume profiles.
• Setups: Look for a clean test of the POC.
• Instruments: Index futures and liquid stocks.
• Time Restrictions: None.
• Chop/News Avoidance: Yes.

Context Framework

• Trend Direction: Can be traded with or against the trend, as long as the POC is respected.
• VWAP Relationship: The POC and VWAP are often in the same area, providing confluence.
• MA Relationship: Not a primary factor.
• Range Location: Near the area of highest volume for the session.
• Higher TF Alignment: Not critical.

Trade Management Rules

• Breakeven: After a 1R move.
• Scale Out: No.
• Add Size: No.
• Fast vs Slow Moves: Works for both.

Time Rules

• Optimal Window: Any.
• Times to Avoid: Very low-volume periods.
• Session Notes: A strategy based on the auction market theory.

Setup Classification

• A+ Setup: A test of the POC that aligns with a key support/resistance level and VWAP.
• A Setup: A clean test of the POC with a reversal candle.
• B Setup: A choppy test of the POC.
• C Setup: Price slices through the POC with no hesitation.

Market Selection Criteria

• Instruments: ES, NQ, CL, GC.
• Volume: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Win Rate: 60%.
• Avg Win: 2R.
• Avg Loss: 1R.
• Profit Factor: 1.8.
• Expectancy: +0.4R.

Failure Conditions

• Market Conditions: A strong trend day where the market is seeking a new area of value.
• Specific Scenarios: A breakout from a multi-day balance area.

Psychological Rules

• Discipline: Trust the POC as a key level of support/resistance.

Advanced Components

• Regime Detection: Use the shape of the volume profile to determine the market type (e.g., D-shape for balance, P-shape for trend).
• Filters: Look for a high-volume node POC, not a low-volume one.
• Correlation: Be aware of how the broader market is reacting to its own POC.
• MTF Alignment: Check the POC on multiple timeframes for confluence.

Location

• Strongest: In balanced, two-sided markets.
• Weakest: In strongly trending, one-sided markets.