Natural Disaster Supply Chain Trade

Entry Logic

• Entry trigger: A natural disaster disrupts a supply chain.
• Confirmation: High volume and a clear trend in the affected stocks.
• Timeframe: Daily and weekly charts.
• Location context: Buy stocks that benefit from the disruption or sell stocks that are negatively affected.
• Market condition: Any market condition.

Exit Logic

• Profit targets: Take profits at key resistance or support levels.
• Scaling out: Not applicable.
• Trailing stop: Use the 50-day moving average as a trailing stop.
• Signal failure exit: Exit if the stock closes above or below the 50-day moving average.
• Opposite signal exit: Not applicable.
• Time expiration: This is a long-term trade, so there is no time expiration.
• Momentum loss: Exit if the stock starts to consolidate for a long period of time.

Stop Loss Structure

• Hard stop: Place a stop loss above or below the 50-day moving average.
• Soft stop: Not applicable.
• Max dollar loss: Not applicable.
• Max percent loss: Do not risk more than 5% of the account on a single trade.
• Structural stop: Place the stop loss above or below a key resistance or support level.

Risk Management Framework

• Risk per trade: 2% of the account.
• Daily limit: Not applicable.
• Weekly limit: Not applicable.
• Max drawdown: 20%.
• R:R requirement: Minimum 3:1 risk/reward ratio.

Position Sizing Model

• Sizing approach: Fixed fractional position sizing.
• Volatility adjustment: Not applicable.
• Conviction sizing: Not applicable.
• Scaling in/out: Not applicable.

Trade Filtering

• Market conditions: Any market condition.
• Setups: Only trade when there is a clear supply chain disruption.
• Instruments: Stocks in the affected sector.
• Time restrictions: Not applicable.
• Chop/news avoidance: Not applicable.

Context Framework

• Trend direction: Not applicable.
• VWAP relationship: Not applicable.
• MA relationship: The stock must be trading above or below its 50-day and 200-day moving averages.
• Range location: Not applicable.
• Higher TF alignment: The weekly and monthly charts must show a clear trend.

Trade Management Rules

• Breakeven: Not applicable.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: This is a long-term trade, so be patient.

Time Rules

• Optimal window: Not applicable.
• Times to avoid: Not applicable.
• Session notes: Not applicable.

Setup Classification

• A+ criteria: Major supply chain disruption in a strong trend.
• A criteria: Supply chain disruption in a trend.
• B criteria: Not applicable.
• C criteria: Avoid trading.

Market Selection Criteria

• Instruments: Stocks in the affected sector.
• Volume: Not applicable.
• Volatility: Not applicable.

Statistical Edge Metrics

• Win rate: 60%.
• Avg win: 5R.
• Avg loss: 1R.
• Profit factor: 3.
• Expectancy: 2R per trade.

Failure Conditions

• The supply chain disruption is quickly resolved.
• The market does not react to the news.

Psychological Rules

• Be patient and let the trade work.
• Do not be swayed by short-term price fluctuations.

Advanced Components

• Regime detection: Not applicable.
• Filters: Not applicable.
• Correlation: Not applicable.
• MTF alignment: Not applicable.

Location

• Strongest: When the disruption is long-lasting and affects a major industry.
• Weakest: When the disruption is short-lived and affects a minor industry.