Adaptive Moving Average Trade

Entry Logic

• Entry trigger: Price pulls back to the Adaptive Moving Average (AMA).
• Confirmation: A reversal candle pattern forms at the AMA.
• Timeframe: 1-hour chart.
• Location context: The AMA is adjusting to the market volatility.
• Market condition: A trending market with changing volatility.

Exit Logic

• Profit target: 2R or the next significant support/resistance level.
• Scaling out: Scale out 50% at 1R.
• Trailing stop: Trail the stop on the other side of the AMA.
• Signal failure: Exit if the price closes on the wrong side of the AMA.
• Opposite signal: Exit on a confirmed reversal signal.
• Time expiration: None.
• Momentum loss: Exit if momentum fades.

Stop Loss Structure

• Hard stop: 1.5 ATR from the entry price.
• Soft stop: A close on the wrong side of the AMA.
• Max dollar loss: $200 per trade.
• Max percent loss: 2% of account.
• Structural stop: Below the most recent swing low (for longs) or above the swing high (for shorts).

Risk Management Framework

• Risk per trade: 1.5% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 5% drawdown.
• Max drawdown: 15%.
• R:R requirement: Minimum 1.5:1.

Position Sizing Model

• Sizing approach: Fixed fractional (1.5% of account).
• Volatility adjustment: The AMA already accounts for volatility.
• Conviction sizing: None.
• Scaling in: Not recommended.
• Scaling out: At 1R and 2R.

Trade Filtering

• Market conditions: Avoid choppy, non-trending markets.
• Setups: Only take pullbacks to the AMA in a clear trend.
• Instruments: Any liquid instrument.
• Time restrictions: None.
• Chop/news avoidance: Avoid trading around major news.

Context Framework

• Trend direction: The trend is confirmed by the slope of the AMA.
• VWAP relationship: Trade in the direction of VWAP.
• MA relationship: The AMA is a dynamic support and resistance level.
• Range location: The trade should be taken in the direction of the overall range expansion.
• Higher TF alignment: The higher timeframe chart should confirm the trend direction.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.
• Scale out: At 1R and 2R.
• Add size: Not recommended.
• Fast vs slow moves: Let the trade run in a strong trend.

Time Rules

• Optimal window: Any time during a trending market.
• Times to avoid: Choppy, non-trending periods.
• Session notes: Works well in all sessions.

Setup Classification

• A+ setup: A perfect pullback to the AMA with a strong reversal candle.
• A setup: A decent pullback with a good reversal candle.
• B setup: A pullback with a weak reversal candle.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Any liquid instrument.
• Volume: High.
• Volatility: The AMA adapts to changing volatility.

Statistical Edge Metrics

• Win rate: 55%.
• Avg win: 2R.
• Avg loss: 1R.
• Profit factor: 1.1.
• Expectancy: 0.1R.

Failure Conditions

• The strategy fails when the trend ends or the market becomes choppy.
• Avoid taking trades if the AMA is flat.

Psychological Rules

• Trust the AMA to adapt to the market conditions.
• Be patient and wait for the pullback.

Advanced Components

• Regime detection: The AMA itself helps to detect the market regime.
• Filters: Only take trades in the direction of the AMA slope.
• Correlation: Be aware of market correlations.
• MTF alignment: Check the higher timeframe trend.

Location

• Strongest: In a trending market with changing volatility.
• Weakest: In a choppy, non-trending market.