Stop Run / Liquidity Sweep Trade

Entry Logic

• Entry is a long position after a sharp move down takes out a key support level and then quickly reverses.
• Confirmation is a bullish engulfing candle on the 5-minute chart.
• Timeframe is the 5-minute chart.
• Location is at a key support level.
• Market is in a range or an uptrend.

Exit Logic

• Profit target is the next resistance level.
• Scale out 50% at a 2:1 risk-reward ratio.
• Trail the stop loss below the low of the last 3 bars.
• Exit if the price takes out the low of the stop run.
• Exit on a bearish reversal pattern.
• Exit if the price does not move up within 30 minutes.
• Exit if buying momentum stalls.

Stop Loss Structure

• Hard stop is placed below the low of the stop run.
• Soft stop is a close below the support level.
• Maximum dollar loss is $150 per trade.
• Maximum percent loss is 1.5% of the account.
• Structural stop is below the low of the stop run.

Risk Management Framework

• Risk 1% of the account per trade.
• Daily loss limit is 3% of the account.
• Weekly loss limit is 6% of the account.
• Maximum drawdown is 20%.
• Risk-reward ratio must be at least 1:2.

Position Sizing Model

• Use a fixed fractional position sizing model.
• Increase size by 50% during high volatility.
• Full size for A+ setups, half size for A setups.
• Do not scale in.
• Scale out as per the exit logic.

Trade Filtering

• Avoid trading in strong downtrends.
• Only trade at key support and resistance levels.
• Trade only highly liquid instruments.
• Avoid trading during news events.
• Do not trade in choppy markets.

Context Framework

• Trend is sideways or up.
• Price is near or above VWAP.
• Price is above the 50 EMA.
• Location is at a key support level.
• The higher timeframe chart (60-minute) shows a consolidation or uptrend.

Trade Management Rules

• Move stop to breakeven after the first profit target is hit.
• Scale out at resistance levels.
• Do not add to the position.
• Let the trade run if buying momentum is strong.

Time Rules

• Optimal trading window is from 9:30 AM to 11:00 AM EST.
• Avoid trading in the afternoon.
• The strategy works best when the market is liquid and volatile.

Setup Classification

• A+ setup: Clear stop run at a major support level with a strong reversal.
• A setup: Stop run at a minor support level.
• B setup: Stop run with a weak reversal.
• C setup: No clear stop run.

Market Selection Criteria

• Trade ES, NQ, and CL futures.
• High liquidity is essential.
• High volatility is preferred.

Statistical Edge Metrics

• Expected win rate is 50%.
• Average win is 3R.
• Average loss is 1R.
• Profit factor is 1.5.
• Expectancy per trade is 0.5R.

Failure Conditions

• The strategy fails if the stop run is a genuine breakout.
• Avoid trading when there is a strong bearish sentiment in the market.

Psychological Rules

• Be prepared to act quickly and decisively.
• Do not be afraid to buy a new low if the context is right.

Advanced Components

• Use a footprint chart to see the absorption during the stop run.
• Use a volatility filter to identify the best opportunities.
• Do not trade correlated instruments at the same time.
• The 60-minute chart should confirm the support level.

Location

• Strongest at major support and resistance levels.
• Weakest in the middle of a range.
• The location of the stop run is critical for the success of the trade.