Price Channel Mean Reversion

Entry Logic

• Long Entry: Price touches the lower line of a 20-period price channel.
• Short Entry: Price touches the upper line of a 20-period price channel.
• Confirmation: A reversal candle.
• Timeframe: 15-minute.
• Location: At the 20-period high or low.
• Market Condition: Ranging.

Exit Logic

• Profit Target: The midpoint of the price channel.
• Scaling Out: No.
• Trailing Stop: No.
• Signal Failure: Exit if price closes outside the channel.
• Opposite Signal: Not applicable.
• Time Expiration: 6-8 bars.
• Momentum Loss: Exit if the reversion stalls.

Stop Loss Structure

• Hard Stop: Just beyond the channel line.
• Soft Stop: A close outside the channel.
• Max Dollar Loss: $400.
• Max Percent Loss: 0.8%.
• Structural Stop: Beyond the recent swing high/low.

Risk Management Framework

• Risk Per Trade: 0.5%.
• Daily Limit: 3 trades.
• Weekly Limit: 3%.
• Max Drawdown: 10%.
• R:R Requirement: 2:1.

Position Sizing Model

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

Trade Filtering

• Market Conditions: Strictly ranging markets.
• Setups: Look for a clean test of the channel line.
• Instruments: Index futures and liquid stocks.
• Time Restrictions: Avoid the open.
• Chop/News Avoidance: Yes.

Context Framework

• Trend Direction: Neutral.
• VWAP Relationship: Fade moves away from VWAP.
• MA Relationship: Price is oscillating around a flat moving average.
• Range Location: At the top or bottom of the recent range.
• Higher TF Alignment: The 60-minute chart should also be in a range.

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: Mid-day.
• Times to Avoid: Open and close.
• Session Notes: A simple range trading strategy.

Setup Classification

• A+ Setup: A touch of the channel line that aligns with a key support/resistance level.
• A Setup: A clean touch of the channel line with a reversal candle.
• B Setup: A choppy test of the channel line.
• C Setup: Price breaks out of the channel.

Market Selection Criteria

• Instruments: ES, NQ, SPY, QQQ.
• Volume: High.
• Volatility: Low to moderate.

Statistical Edge Metrics

• Win Rate: 60%.
• Avg Win: 1.8R.
• Avg Loss: 1R.
• Profit Factor: 1.48.
• Expectancy: +0.28R.

Failure Conditions

• Market Conditions: A breakout from a consolidation.
• Specific Scenarios: A news-driven trend day.

Psychological Rules

• Discipline: Must be patient and avoid chasing price.

Advanced Components

• Regime Detection: Use ADX to confirm a ranging market.
• Filters: Avoid trading when the channel is very wide.
• Correlation: Be aware of the overall market direction.
• MTF Alignment: Check the 60-minute chart for range confirmation.

Location

• Strongest: In quiet, established ranges.
• Weakest: In volatile, trending markets.