Short Squeeze Catalyst Trade

Entry Logic

• Entry trigger: Stock with high short interest has a positive catalyst.
• Confirmation: Stock price breaks above a key resistance level on high volume.
• Timeframe: 1-minute and 5-minute charts.
• Location context: Buy on a pullback to a key support level.
• Market condition: Any market condition.

Exit Logic

• Profit targets: Take profits at key resistance levels.
• Scaling out: Scale out of the position as it moves in your favor.
• Trailing stop: Use a tight trailing stop to protect profits.
• Signal failure exit: Exit if the stock closes below the breakout level.
• Opposite signal exit: Not applicable.
• Time expiration: Exit the trade by the end of the day.
• Momentum loss: Exit if momentum slows down.

Stop Loss Structure

• Hard stop: Place a stop loss below the breakout level.
• Soft stop: Not applicable.
• Max dollar loss: Do not risk more than $100 per trade.
• Max percent loss: Do not risk more than 1% of the account on a single trade.
• Structural stop: Place the stop loss below a key support level.

Risk Management Framework

• Risk per trade: 0.5% of the account.
• Daily limit: Stop trading after three consecutive losses.
• Weekly limit: Stop trading for the week if down 5%.
• Max drawdown: 15%.
• R:R requirement: Minimum 3:1 risk/reward ratio.

Position Sizing Model

• Sizing approach: Fixed fractional position sizing.
• Volatility adjustment: Reduce position size on high volatility days.
• Conviction sizing: A+ setups get full size, A setups get half size, B setups get quarter size.
• Scaling in/out: Scale in on pullbacks to the 9 EMA. Scale out at pre-defined targets.

Trade Filtering

• Market conditions: Any market condition.
• Setups: Only trade A+ or A setups.
• Instruments: Only trade stocks with a high short interest and a positive catalyst.
• Time restrictions: Only trade during the first two hours of the market open.
• Chop/news avoidance: Avoid trading stocks with a history of fading after gapping up.

Context Framework

• Trend direction: Not applicable.
• VWAP relationship: The stock must be trading above VWAP.
• MA relationship: The stock must be trading above its 50-day and 200-day moving averages.
• Range location: The stock must be breaking out of a recent consolidation range.
• Higher TF alignment: Not applicable.

Trade Management Rules

• Breakeven: Move the stop loss to breakeven after the first target is hit.
• Scale out: As defined in the exit logic.
• Add size: Not applicable.
• Fast vs slow moves: Let the winners run on fast moves. Take profits quicker on slow moves.

Time Rules

• Optimal window: 9:30 AM - 11:30 AM ET.
• Times to avoid: Avoid trading during the lunch hour (12:00 PM - 1:00 PM ET).
• Session notes: The morning session is the most volatile and offers the best opportunities.

Setup Classification

• A+ criteria: Perfect setup with all conditions met.
• A criteria: Most conditions are met, but not all.
• B criteria: Some conditions are met, but the setup is not ideal.
• C criteria: Avoid trading.

Market Selection Criteria

• Instruments: Stocks with a short interest over 20%.
• Volume: Minimum 1 million shares traded per day.
• Volatility: ATR greater than 5% of the stock price.

Statistical Edge Metrics

• Win rate: 40%.
• Avg win: 10R.
• Avg loss: 1R.
• Profit factor: 4.
• Expectancy: 3R per trade.

Failure Conditions

• The catalyst is not strong enough to trigger a short squeeze.
• The shorts are able to defend their position.

Psychological Rules

• This is a high-risk, high-reward trade. Be prepared for large price swings.
• Do not get greedy. Take profits at your targets.

Advanced Components

• Regime detection: Not applicable.
• Filters: Use a short interest filter to find stocks with high short interest.
• Correlation: Not applicable.
• MTF alignment: Not applicable.

Location

• Strongest: When the catalyst is unexpected.
• Weakest: When the catalyst is expected.