Fibonacci Extension Target (161.8%)

Entry Logic

• Exact Entry Trigger: Entry on a breakout of a previous swing high/low.
• Confirmation: A surge in volume and momentum.
• Timeframe: Daily chart.
• Location Context: The breakout should be from a major consolidation pattern.
• Market Condition: A market that is in a strong trend.

Exit Logic

• Profit Target(s): The 161.8% Fibonacci extension level is the main target.
• Scaling Out: Take 50% profit at the 161.8% level and let the rest run.
• Trailing Stop: Use a 3-day low/high as a trailing stop.
• Exit on Signal Failure: A close back within the consolidation.
• Exit on Opposite Signal: A major reversal pattern.
• Exit on Time Expiration: None.
• Exit on Momentum Loss: A sharp drop in momentum.

Stop Loss Structure

• Hard Stop: Place the stop loss within the consolidation pattern.
• Soft Stop: A daily close back inside the pattern.
• Maximum Dollar Loss: $500 per trade.
• Maximum Percent Loss: 4% of the account.
• Structural Stop: Below a major support level within the consolidation.

Risk Management Framework

• Risk Per Trade: 3% of the account.
• Maximum Daily Loss Limit: 7%.
• Maximum Weekly Loss Limit: 15%.
• Maximum Drawdown: 40%.
• Risk-Reward Ratio: Minimum 1:3.

Position Sizing Model

• Sizing Approach: Fixed percentage.
• Volatility-Based Adjustment: None.
• Conviction-Based Sizing: A+ setups get 4% risk, A setups 3%, B setups 2%.
• Scaling In: Not recommended.
• Scaling Out: At the 161.8% level.

Trade Filtering

• Market Conditions to Avoid: Ranging markets.
• Specific Setups Required: A major breakout.
• Instrument Requirements: All major asset classes.
• Time of Day Restrictions: None.
• Chop/News Avoidance: Be aware of major news events.

Context Framework

• Trend Direction: Aligned with the weekly trend.
• VWAP Relationship: Not applicable.
• Moving Average Relationship: The breakout should be supported by long-term moving averages.
• Range Location: The breakout from a range is the setup.
• Higher Timeframe Alignment: Essential.

Trade Management Rules

• Breakeven: After 1R of profit.
• Scale Out: At the target.
• Add Size: No.
• Fast vs. Slow Moves: This is a position trading strategy, so be patient.

Time Rules

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

Setup Classification

• A+ Setup: A breakout from a multi-year consolidation.
• A Setup: A breakout from a multi-month consolidation.
• B Setup: A breakout from a shorter-term consolidation.
• C Setup: A weak breakout.

Market Selection Criteria

• Instrument Requirements: All.
• Volume/Liquidity: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Expected Win Rate: 50-55%
• Average Win: 4R
• Average Loss: 1R
• Profit Factor: 2.2
• Expectancy Per Trade: +1.2R

Failure Conditions

• Market Conditions: A failed breakout.
• Specific Scenarios: A breakout that is quickly and violently rejected.

Psychological Rules

• Mental Discipline: The ability to hold a trade for a long period of time.

Advanced Components

• Market Regime Detection: None.
• Volatility/Liquidity Filters: None.
• Correlation Filters: None.
• Multi-Timeframe Alignment: Crucial.

Location

• Where Strongest: In a market that is beginning a new, powerful trend.
• Where Weakest: In a market that is range-bound.