4. Emerging Market Momentum

Entry Logic

Trigger: Emerging Markets ETF (EEM) daily close above 50-DMA with RSI 14-period above 60. Confirmation: EEM daily volume 1.5x average. Timeframe: Daily for trigger and confirmation. Location Context: EEM breaking out of 3-week consolidation. Market Condition: Weakening US dollar, global risk-on sentiment.

Exit Logic

Profit Target: EEM reaches 2.5 ATR from entry. Scaling Out: 30% position at 1 ATR profit, 30% at 1.5 ATR. Trailing Stop: 0.8 ATR below highest daily close. Signal Failure: EEM daily close below 50-DMA. Time Expiration: No open position after 10 trading days. Momentum Loss: EEM daily RSI drops below 50.

Stop Loss Structure

Hard Stop: 1.2 ATR below entry price. Soft Stop: EEM daily close below 20-DMA. Max Dollar Loss: $800 per trade. Max Percent Loss: 2.25% of trading capital. Structural Stop: EEM breaks below previous swing low on daily chart.

Risk Management Framework

Risk Per Trade: 1.75% of capital. Daily Limit: 5% capital loss. Weekly Limit: 11% capital loss. Max Drawdown: 25% of capital. R:R Requirement: Minimum 2.2:1.

Position Sizing Model

Sizing Approach: Fixed fractional 1.75% risk. Volatility Adjustment: Use daily ATR for share size. Conviction Sizing: 2.25% risk for A+ setups with strong commodity prices. Scaling In/Out: Scale out at profit targets. No scaling in.

Trade Filtering

Market Conditions: Stable geopolitical environment. Setups: Clear breakout with momentum. Instruments: EEM. Time Restrictions: Avoid trading during major central bank meetings in emerging economies. Chop/News Avoidance: Avoid major political elections in large emerging markets.

Context Framework

Trend Direction: Emerging markets uptrend. VWAP Relationship: EEM daily close above weekly VWAP. MA Relationship: EEM daily above 20 and 50 DMA. Range Location: EEM breaking out of multi-month base. Higher TF: Weekly EEM chart shows strong momentum.

Trade Management Rules

Breakeven: Move stop to entry after 0.8 ATR profit. Scale Out: 30% at 1 ATR, 30% at 1.5 ATR, rest at 2.5 ATR. Add Size: Never. Fast vs Slow Moves: Adjust trailing stop based on volatility.

Time Rules

Optimal Window: 9:30 AM - 1:00 PM EST. Times to Avoid: End of trading day. Session Notes: Early session often sets the tone.

Setup Classification

A+ Criteria: Breakout with 2x average volume, RSI above 70, strong commodity tailwinds. A Criteria: Breakout with 1.5x average volume, RSI above 60. B Criteria: Breakout with average volume, RSI above 55. C Criteria: Avoid.

Market Selection Criteria

Instruments: EEM. Volume: Average daily volume > 20 million shares. Volatility: ATR daily > 1.5%.

Statistical Edge Metrics

Win Rate: 48%. Avg Win: $2000. Avg Loss: $800. Profit Factor: 2.4. Expectancy: $560 per trade.

Failure Conditions

Strategy Fails: US dollar strength. Global risk-off sentiment. Geopolitical instability.

Psychological Rules

Mental Discipline: Be patient for high conviction setups. Do not overtrade. Accept losses.

Advanced Components

Regime Detection: Monitor commodity prices (CRB Index). Filters: Volume and RSI filters. Correlation: Monitor EEM correlation with US dollar. MTF Alignment: Weekly, daily charts must align for momentum.

Location

Strongest: Commodity bull markets, weak dollar. Weakest: Strong dollar, global economic contraction.