Retail Trap Identification

Entry Logic

• Entry trigger: Identify a classic retail pattern (e.g., head and shoulders, bull flag) that is forming in a location where it is likely to fail (e.g., a bull flag forming right under major resistance). Enter against the expected breakout.
• Confirmation: The pattern fails with a strong candle in the opposite direction.
• Timeframe: 15-minute chart.
• Location context: The key is the location; the pattern must be forming at a point of likely reversal.
• Market condition: A market that appears to be trending but is showing signs of exhaustion.

Exit Logic

• Profit target: The origin of the failed pattern.
• Scaling out: Not recommended.
• Trailing stop: Aggressive trail to lock in profits.
• Signal failure exit: Exit if the pattern's expected breakout occurs.
• Opposite signal exit: Not applicable.
• Time expiration: Exit if the trade is not profitable quickly.
• Momentum loss: Exit if the reversal stalls.

Stop Loss Structure

• Hard stop: Just beyond the point where the pattern would be invalidated.
• Soft stop: Not used.
• Max dollar loss: $150 per trade.
• Max percent loss: 0.75% of account.
• Structural stop: Placed at the logical failure point of the retail pattern.

Risk Management Framework

• Risk per trade: 0.5% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 3% drawdown.
• Max drawdown: 10%.
• R:R requirement: Minimum 3:1.

Position Sizing Model

• Sizing approach: Fixed risk per trade.
• Volatility adjustment: Standard sizing.
• Conviction sizing: This is an advanced, high-conviction setup.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions to avoid: Strong, confirmed trends where retail patterns are likely to work.
• Setups required: A classic retail pattern forming at a key higher-timeframe level.
• Instruments: Forex and indices.
• Time restrictions: High-volume sessions.
• Chop/news avoidance: Avoid around news.

Context Framework

• Trend direction: Counter-trend.
• VWAP relationship: The pattern often forms far from the VWAP, and the reversal is a reversion to the mean.
• MA relationship: The pattern is often rejected by a key MA.
• Range location: At the top or bottom of a range.
• Higher TF alignment: The higher timeframe chart shows that the retail pattern is forming into a major level of resistance/support.

Trade Management Rules

• Breakeven: Move to breakeven very quickly (1R).
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: Expect a very fast move as the trapped traders are stopped out.

Time Rules

• Optimal window: New York session.
• Times to avoid: Low-volume periods.
• Session notes: Look for these traps after a prolonged move.

Setup Classification

• A+ criteria: A textbook retail pattern forming perfectly into a major weekly level.
• A criteria: A clear retail pattern at a key level.
• B criteria: The pattern is not clear, or the level is not significant.
• C criteria: The market is trending strongly.

Market Selection Criteria

• Instruments: EUR/USD, SPX500.
• Volume: High volume on the failure of the pattern.
• Volatility: High.

Statistical Edge Metrics

• Win rate: 35%.
• Avg win: 6R.
• Avg loss: 1R.
• Profit factor: 2.1.
• Expectancy: High.

Failure Conditions

• The retail pattern works, and the expected breakout occurs.
• The market consolidates after the pattern fails.

Psychological Rules

• Requires thinking like a contrarian.
• Must be able to identify and fade common patterns.

Advanced Components

• Regime detection: Look for signs of trend exhaustion.
• Filters: Use sentiment indicators to see if retail traders are heavily positioned for the breakout.
• Correlation: Not a primary factor.
• MTF alignment: The key is the conflict between the lower-timeframe pattern and the higher-timeframe location.

Location

• Strongest: At major higher-timeframe support and resistance levels.
• Weakest: In a strong, trending market.