Internal Structure Trade

Entry Logic

• Entry trigger: After a major impulse move (external structure), price makes a smaller, corrective pullback (internal structure). Entry is on the break of the internal structure's trendline in the direction of the main trend.
• Confirmation: A 5-minute candle closes beyond the internal trendline with a volume increase.
• Timeframe: 1-hour for external structure, 5-minute for internal structure and entry.
• Location context: The pullback should retrace to a Fibonacci level (e.g., 38.2% or 50%) of the major impulse move.
• Market condition: Strong trending market that is currently in a corrective phase.

Exit Logic

• Profit target: The previous external structure high/low.
• Scaling out: Scale out 50% at 2R.
• Trailing stop: Trail the stop below the 5-minute 20-period EMA.
• Signal failure exit: Exit if price breaks the 61.8% Fibonacci retracement level.
• Opposite signal exit: Exit if the external market structure shifts against the trade.
• Time expiration: Exit if the trade is not profitable within 90 minutes.
• Momentum loss: Exit if the breakout from the internal structure lacks momentum.

Stop Loss Structure

• Hard stop: 1 ATR below the low of the entry candle (for longs) or above the high (for shorts).
• Soft stop: A 5-minute close back inside the internal structure.
• Max dollar loss: $100 per trade.
• Max percent loss: 0.5% of account.
• Structural stop: Below the low of the internal structure pullback.

Risk Management Framework

• Risk per trade: 0.4% of account.
• Daily limit: 4 losing trades.
• Weekly limit: 5% drawdown.
• Max drawdown: 15%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Fixed fractional sizing.
• Volatility adjustment: Adjust size based on the 5-minute ATR.
• Conviction sizing: Use 125% of normal size for A+ setups, as it's a high-probability trend continuation trade.
• Scaling in: Can add to the position on a successful retest of the breakout level.
• Scaling out: At 2R.

Trade Filtering

• Market conditions to avoid: Ranging markets with no clear external structure.
• Setups required: A clear impulse wave followed by a corrective, low-volume pullback.
• Instruments: Any trending instrument.
• Time restrictions: Best during the first half of the main trading session.
• Chop/news avoidance: Pause trading 30 minutes before and after major news.

Context Framework

• Trend direction: Aligned with the dominant, external trend.
• VWAP relationship: Price pulls back to the VWAP and finds support/resistance.
• MA relationship: The 1-hour 20 EMA is holding as dynamic support/resistance.
• Range location: Within the upper/lower half of the impulse wave's range.
• Higher TF alignment: The 4-hour and daily charts confirm the primary trend direction.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1.5R move.
• Scale out: At 2R.
• Add size: On a successful retest of the internal structure breakout.
• Fast vs slow moves: Expect a quick move towards the external structure high/low.

Time Rules

• Optimal window: 9:30 AM to 11:00 AM EST.
• Times to avoid: Lunchtime and end-of-day.
• Session notes: High probability during strong trending days.

Setup Classification

• A+ criteria: Pullback is a clean, three-wave correction (A-B-C) to the 50% Fibonacci level on low volume.
• A criteria: A clear pullback and a decisive break of the internal structure.
• B criteria: The pullback is choppy and complex.
• C criteria: No clear external trend is present.

Market Selection Criteria

• Instruments: QQQ, TQQQ, SQQQ, and other leveraged ETFs that have strong trends.
• Volume: High volume on the impulse, low volume on the correction.
• Volatility: High enough to create clear impulse moves.

Statistical Edge Metrics

• Win rate: 65%.
• Avg win: 2.2R.
• Avg loss: 1R.
• Profit factor: 1.43.
• Expectancy: 0.43R per trade.

Failure Conditions

• The pullback is not a correction, but the start of a major reversal.
• The breakout from the internal structure is a fakeout.

Psychological Rules

• Requires patience to wait for the pullback to complete.
• Must have the conviction to enter when price is moving against the primary trend (during the pullback).

Advanced Components

• Regime detection: Use ADX to confirm a strongly trending market (ADX > 25).
• Filters: Use Fibonacci extensions to project profit targets beyond the previous high/low.
• Correlation: Trade in the direction of the overall market index (e.g., long tech stocks if QQQ is in an uptrend).
• MTF alignment: The trade must be in the direction of the 1-hour, 4-hour, and daily trends.

Location

• Strongest: In a textbook impulse-correction-impulse sequence within a strong trend.
• Weakest: When the market is choppy and lacks clear directional bias.