Market Profile Range Extension

Entry Logic

• Entry is a long position when the price moves beyond the initial balance high and shows signs of continuation.
• Confirmation is a strong bullish candle closing above the initial balance high.
• Timeframe is the 30-minute chart.
• Location is above the initial balance high.
• Market is in an uptrend.

Exit Logic

• Profit target is a 1.5x extension of the initial balance range.
• Scale out 50% at a 1:1 risk-reward ratio.
• Trail the stop loss below the low of the previous bar.
• Exit if the price closes back inside the initial balance.
• Exit on a bearish reversal pattern.
• Exit if the price does not move up within 3 bars.
• Exit if buying momentum stalls.

Stop Loss Structure

• Hard stop is placed below the low of the entry candle.
• Soft stop is a close back inside the initial balance.
• Maximum dollar loss is $300 per trade.
• Maximum percent loss is 3% of the account.
• Structural stop is below the initial balance high.

Risk Management Framework

• Risk 2% of the account per trade.
• Daily loss limit is 6% of the account.
• Weekly loss limit is 12% of the account.
• Maximum drawdown is 30%.
• 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 on range-bound days.
• Only trade when the initial balance is relatively narrow.
• Trade only major stock indices.
• Avoid trading during news events.
• Do not trade in choppy markets.

Context Framework

• Trend is up.
• Price is above VWAP.
• Price is above the 50 EMA.
• Location is above the initial balance high.
• The higher timeframe chart (daily) shows a clear uptrend.

Trade Management Rules

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

Time Rules

• Optimal trading window is from 10:30 AM to 12:30 PM EST.
• Avoid trading in the afternoon.
• The strategy works best on trend days.

Setup Classification

• A+ setup: Strong range extension in a strong uptrend.
• A setup: Moderate range extension in a moderate uptrend.
• B setup: Weak range extension.
• C setup: No clear trend.

Market Selection Criteria

• Trade SPY, QQQ, and IWM.
• High volume 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 range extension is a false breakout.
• Avoid trading when there is a strong bearish sentiment in the market.

Psychological Rules

• Be patient and wait for the range extension to be confirmed.
• Do not be afraid to buy a new high.

Advanced Components

• Use a market profile to identify the initial balance.
• Use a trend filter to confirm the uptrend.
• Do not trade correlated indices in the same direction.
• The daily chart must confirm the uptrend.

Location

• Strongest at the beginning of a new trend.
• Weakest in a mature trend.
• The location of the range extension within the overall trend is important.