Impulse and Correction Trade

Entry Logic

• Entry trigger: After a strong impulse move, price makes a corrective pullback to a Fibonacci retracement level (e.g., 50% or 61.8%).
• Confirmation: A bullish/bearish candle at the Fibonacci level.
• Timeframe: 1-hour for the impulse and correction, 15-minute for the entry.
• Location context: In a trending market.
• Market condition: Trending.

Exit Logic

• Profit target: The previous swing high/low.
• Scaling out: 50% at 2R.
• Trailing stop: Trail below the 15-minute 20 EMA.
• Signal failure exit: Exit if price breaks the 78.6% Fibonacci level.
• Opposite signal exit: Exit on a market structure shift.
• Time expiration: Exit if the trade is not profitable within 2 hours.
• Momentum loss: Exit if momentum fades.

Stop Loss Structure

• Hard stop: Below the low of the confirmation candle.
• Soft stop: Not used.
• Max dollar loss: $120 per trade.
• Max percent loss: 0.6% of account.
• Structural stop: Below the 61.8% Fibonacci level.

Risk Management Framework

• Risk per trade: 0.5% of account.
• Daily limit: 3 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: Standard sizing.
• Conviction sizing: Full size for A+ setups.
• Scaling in: Not recommended.
• Scaling out: At 2R.

Trade Filtering

• Market conditions to avoid: Ranging markets.
• Setups required: A clear impulse move and a corrective pullback.
• Instruments: Any trending instrument.
• Time restrictions: High-volume sessions.
• Chop/news avoidance: Avoid around news.

Context Framework

• Trend direction: With the dominant trend.
• VWAP relationship: Price pulls back to the VWAP.
• MA relationship: The 20 EMA is acting as dynamic support.
• Range location: Not a range trade.
• Higher TF alignment: The higher timeframes are also in a trend.

Trade Management Rules

• Breakeven: Move to breakeven at 1.5R.
• Scale out: At 2R.
• Add size: Not applicable.
• Fast vs slow moves: Let profits run.

Time Rules

• Optimal window: Any high-volume session.
• Times to avoid: Low-volume periods.
• Session notes: A classic trend-following setup.

Setup Classification

• A+ criteria: A perfect pullback to the 61.8% Fibonacci level with a strong confirmation candle.
• A criteria: A clear pullback to a Fibonacci level.
• B criteria: The pullback is choppy.
• C criteria: No clear impulse move.

Market Selection Criteria

• Instruments: Any liquid, trending instrument.
• Volume: High volume on the impulse, low volume on the correction.
• Volatility: Moderate.

Statistical Edge Metrics

• Win rate: 60%.
• Avg win: 2.5R.
• Avg loss: 1R.
• Profit factor: 1.5.
• Expectancy: 0.5R per trade.

Failure Conditions

• The pullback is not a correction, but a reversal.
• The trend is exhausted.

Psychological Rules

• Requires patience to wait for the pullback.
• Requires discipline to trade with the trend.

Advanced Components

• Regime detection: Use ADX to confirm a trending market.
• Filters: Use Fibonacci extensions to project profit targets.
• Correlation: Trade in the direction of the broader market.
• MTF alignment: Essential.

Location

• Strongest: In a strong, established trend.
• Weakest: In a ranging market.