3. Domestic vs International Rotation

Entry Logic

Trigger: Relative Strength (RS) line of Domestic ETF (SPY) crossing above International ETF (EFA) on daily chart. Confirmation: SPY daily close above 20-DMA. Timeframe: Daily for trigger and confirmation. Location Context: RS line crossing above 50-DMA on daily. Market Condition: Strong US dollar, US economic outperformance.

Exit Logic

Profit Target: SPY reaches 1.8 ATR from entry. Scaling Out: 40% position at 1 ATR profit. Trailing Stop: 0.6 ATR below highest daily close. Signal Failure: RS line of SPY drops below EFA. Time Expiration: No open position after 7 trading days. Momentum Loss: SPY daily RSI drops below 45.

Stop Loss Structure

Hard Stop: 0.9 ATR below entry price. Soft Stop: SPY daily close below 20-DMA. Max Dollar Loss: $600 per trade. Max Percent Loss: 1.75% of trading capital. Structural Stop: SPY breaks below previous daily swing low.

Risk Management Framework

Risk Per Trade: 1.25% of capital. Daily Limit: 3.5% capital loss. Weekly Limit: 8% capital loss. Max Drawdown: 18% of capital. R:R Requirement: Minimum 1.8:1.

Position Sizing Model

Sizing Approach: Fixed fractional 1.25% risk. Volatility Adjustment: Use daily ATR for share size. Conviction Sizing: 1.75% risk for A+ setups with strong geopolitical support for domestic. Scaling In/Out: Scale out at profit targets. No scaling in.

Trade Filtering

Market Conditions: Stable geopolitical landscape. Setups: Clear RS line crossover. Instruments: SPY, EFA. Time Restrictions: Avoid trading during major international summits. Chop/News Avoidance: Avoid trading during US presidential elections.

Context Framework

Trend Direction: Domestic market outperforming. VWAP Relationship: SPY daily close above weekly VWAP. MA Relationship: SPY daily above 20 and 50 DMA. Range Location: SPY breaking out of multi-day consolidation. Higher TF: Weekly SPY chart shows strength.

Trade Management Rules

Breakeven: Move stop to entry after 0.6 ATR profit. Scale Out: 40% at 1 ATR, rest at 1.8 ATR. Add Size: Never. Fast vs Slow Moves: Adjust trailing stop based on daily candle size.

Time Rules

Optimal Window: 10:30 AM - 2:00 PM EST. Times to Avoid: Overnight news. Session Notes: Mid-day often offers clearer trends.

Setup Classification

A+ Criteria: RS line crossover with strong volume, clear economic divergence favoring US. A Criteria: RS line crossover, moderate volume. B Criteria: Weak crossover, low volume. C Criteria: Avoid.

Market Selection Criteria

Instruments: SPY, EFA. Volume: Average daily volume > 100 million shares. Volatility: ATR daily > 0.75%.

Statistical Edge Metrics

Win Rate: 52%. Avg Win: $1080. Avg Loss: $600. Profit Factor: 1.87. Expectancy: $254 per trade.

Failure Conditions

Strategy Fails: US dollar weakness. Unexpected international economic strength.

Psychological Rules

Mental Discipline: Avoid emotional decisions. Stick to the plan. Do not anticipate.

Advanced Components

Regime Detection: Monitor currency strength (DXY). Filters: Volume filter on RS line crossover. Correlation: Monitor correlation between SPY and EFA. MTF Alignment: Weekly, daily charts must align for domestic strength.

Location

Strongest: Periods of US economic leadership. Weakest: Global synchronized growth.