Fibonacci Extension Target (127.2%)

Entry Logic

• Exact Entry Trigger: Entry is taken on a breakout of a previous swing high/low.
• Confirmation: High volume on the breakout.
• Timeframe: 4-hour chart.
• Location Context: The breakout should occur from a well-defined consolidation pattern.
• Market Condition: A market that is starting a new leg of a trend.

Exit Logic

• Profit Target(s): The 127.2% Fibonacci extension level is the primary profit target.
• Scaling Out: Take 75% of the profit at the 127.2% level.
• Trailing Stop: Trail the remaining 25% with a moving average.
• Exit on Signal Failure: A false breakout that returns into the consolidation range.
• Exit on Opposite Signal: A reversal pattern at the breakout level.
• Exit on Time Expiration: None.
• Exit on Momentum Loss: A failure to reach the target with conviction.

Stop Loss Structure

• Hard Stop: Place the stop loss inside the previous consolidation range.
• Soft Stop: A 4-hour close back inside the range.
• Maximum Dollar Loss: $300 per trade.
• Maximum Percent Loss: 3% of the account.
• Structural Stop: Below the low of the breakout candle.

Risk Management Framework

• Risk Per Trade: 2.5% of the account.
• Maximum Daily Loss Limit: 6%.
• Maximum Weekly Loss Limit: 12%.
• Maximum Drawdown: 35%.
• Risk-Reward Ratio: Minimum 1:2.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility-Based Adjustment: None.
• Conviction-Based Sizing: A+ setups get 3% risk, A setups 2.5%, B setups 2%.
• Scaling In: Not recommended.
• Scaling Out: At the 127.2% level.

Trade Filtering

• Market Conditions to Avoid: Ranging markets.
• Specific Setups Required: A clear breakout from a consolidation.
• Instrument Requirements: Stocks and indices.
• Time of Day Restrictions: None.
• Chop/News Avoidance: Avoid breakouts on low volume.

Context Framework

• Trend Direction: The breakout should be in the direction of the daily trend.
• VWAP Relationship: Not a primary factor.
• Moving Average Relationship: The breakout should be supported by the moving averages.
• Range Location: The breakout from a range is the setup.
• Higher Timeframe Alignment: The weekly chart should support the breakout.

Trade Management Rules

• Breakeven: After the price has moved 1R in your favor.
• Scale Out: At the target.
• Add Size: No.
• Fast vs. Slow Moves: Be prepared for a quick move to the target.

Time Rules

• Optimal Trading Window: Any.
• Times to Avoid: None.
• Session-Specific Notes: None.

Setup Classification

• A+ Setup: A breakout with very high volume and a clean retest of the breakout level.
• A Setup: A clean breakout with good volume.
• B Setup: A breakout with mediocre volume.
• C Setup: A breakout that looks like it might be a fakeout.

Market Selection Criteria

• Instrument Requirements: Stocks, ETFs.
• Volume/Liquidity: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Expected Win Rate: 60-65%
• Average Win: 2R
• Average Loss: 1R
• Profit Factor: 1.3
• Expectancy Per Trade: +0.3R

Failure Conditions

• Market Conditions: A false breakout.
• Specific Scenarios: A breakout that occurs on low volume and is quickly rejected.

Psychological Rules

• Mental Discipline: Have the conviction to hold the trade to the target.

Advanced Components

• Market Regime Detection: None.
• Volatility/Liquidity Filters: High liquidity is key.
• Correlation Filters: None.
• Multi-Timeframe Alignment: Important.

Location

• Where Strongest: After a period of consolidation in a trending market.
• Where Weakest: In a choppy market with no clear direction.