Trapped Traders Trade

Entry Logic

• Entry is a short position when price breaks below a key support level, pauses, and then fails to rally back above it.
• Confirmation is a bearish engulfing candle below the broken support level.
• Timeframe is the 15-minute chart.
• Location is below a broken support level.
• Market is in a downtrend.

Exit Logic

• Profit target is the next support level.
• Scale out 50% at a 1:1 risk-reward ratio.
• Trail the stop loss above the high of each previous bar.
• Exit if the price rallies back above the broken support level.
• Exit on a bullish reversal pattern.
• Exit if the price does not move down within 4 bars.
• Exit if selling momentum stalls.

Stop Loss Structure

• Hard stop is placed above the high of the confirmation candle.
• Soft stop is a close back above the broken support level.
• Maximum dollar loss is $200 per trade.
• Maximum percent loss is 2% of the account.
• Structural stop is above the broken support level.

Risk Management Framework

• Risk 1.5% of the account per trade.
• Daily loss limit is 4.5% of the account.
• Weekly loss limit is 9% of the account.
• Maximum drawdown is 25%.
• Risk-reward ratio must be at least 1:1.5.

Position Sizing Model

• Use a fixed fractional position sizing model.
• No volatility adjustment.
• Full size for all setups.
• Do not scale in.
• Scale out as per the exit logic.

Trade Filtering

• Avoid trading in uptrends.
• Only trade when there is a clear break of a support level.
• Trade only major currency pairs.
• Avoid trading during news events.
• Do not trade in choppy markets.

Context Framework

• Trend is down.
• Price is below VWAP.
• Price is below the 20 and 50 EMAs.
• Location is below a broken support level.
• The higher timeframe chart (daily) shows a clear downtrend.

Trade Management Rules

• Move stop to breakeven after the first profit target is hit.
• Scale out at the next support level.
• Do not add to the position.
• Let the trade run if selling momentum is strong.

Time Rules

• Optimal trading window is from 9:00 AM to 12:00 PM EST.
• Avoid trading in the afternoon.
• The strategy works best on trending days.

Setup Classification

• A+ setup: Clear break of a major support level with a strong rejection.
• A setup: Break of a minor support level.
• B setup: Break of a support level with a weak rejection.
• C setup: No clear break of a support level.

Market Selection Criteria

• Trade EUR/USD, GBP/USD, and JPY/USD.
• High liquidity is required.
• Moderate to high volatility is preferred.

Statistical Edge Metrics

• Expected win rate is 60%.
• Average win is 2R.
• Average loss is 1R.
• Profit factor is 1.2.
• Expectancy per trade is 0.2R.

Failure Conditions

• The strategy fails if the breakout is a false one.
• Avoid trading when there is a strong bullish sentiment in the market.

Psychological Rules

• Be patient and wait for the confirmation of the trapped traders.
• Do not be afraid to short a new low.

Advanced Components

• Use a footprint chart to see the trapped traders.
• Use a trend filter to confirm the downtrend.
• Do not trade correlated pairs in the same direction.
• The daily chart must confirm the downtrend.

Location

• Strongest below major support levels.
• Weakest above major support levels.
• The location of the trapped traders is critical for the success of the trade.