Daily Pivot Point Bounce

Entry Logic

• Enter long when price touches the daily pivot point (DP) from above and a bullish reversal candle forms.
• Enter short when price touches the DP from below and a bearish reversal candle forms.
• Confirmation requires a second candle to close in the direction of the trade.
• Timeframe is 5-minute chart.
• Location is at the daily pivot point.
• Market must be in a trading range or a weak trend.

Exit Logic

• Profit target is the first support/resistance level (S1/R1).
• Scale out 50% of the position at S1/R1.
• Trail the remaining position with a 10-period moving average.
• Exit if the price closes back across the daily pivot point.
• Exit on a confirmed opposing signal.
• Exit the trade if not profitable within 2 hours.
• Exit if momentum indicators like RSI diverge from price.

Stop Loss Structure

• Hard stop is placed 10 ticks below the entry candle for a long, or 10 ticks above for a short.
• Soft stop is a close back across the daily pivot point.
• Maximum dollar loss is $100 per trade.
• Maximum percent loss is 1% of the account.
• Structural stop is placed below the most recent swing low for a long, or above the most recent swing high for a short.

Risk Management Framework

• Risk 0.5% of account equity per trade.
• Maximum daily loss is 2% of account equity.
• Maximum weekly loss is 5% of account equity.
• Maximum drawdown is 15% of account equity.
• Minimum risk-reward ratio is 1:2.

Position Sizing Model

• Use a fixed fractional position sizing model.
• Reduce position size by 25% if the VIX is above 20.
• Increase position size by 25% for A+ setups.
• Do not scale in.
• Scale out 50% at the first profit target.

Trade Filtering

• Avoid trading during major news events.
• Only trade setups with a clear bounce off the pivot point.
• Trade liquid instruments like ES or NQ futures.
• Avoid trading in the first 30 minutes of the session.
• Avoid trading in choppy, low-volume markets.

Context Framework

• Trade is neutral to the trend direction.
• Price should be trading around the VWAP.
• Price should be trading around the 20-period EMA.
• The trade is taken at the daily pivot point.
• The higher timeframe chart (60-minute) should also be in a range.

Trade Management Rules

• Move stop to breakeven when the first profit target is hit.
• Scale out at S1/R1.
• Do not add to the position.
• In a fast move, trail the stop with a 5-period moving average.

Time Rules

• Optimal trading window is between 10:00 AM and 12:00 PM EST.
• Avoid trading after 3:00 PM EST.
• The strategy works best during the London and New York sessions.

Setup Classification

• A+ setup: Perfect bounce with high volume confirmation.
• A setup: Bounce with moderate volume confirmation.
• B setup: Bounce with low volume confirmation.
• C setup: No clear bounce or confirmation.

Market Selection Criteria

• Trade major index futures (ES, NQ, YM).
• Minimum daily volume of 1 million contracts.
• Average True Range (ATR) of at least 20 points.

Statistical Edge Metrics

• Expected win rate is 60%.
• Average win is 40 ticks.
• Average loss is 20 ticks.
• Profit factor is 1.8.
• Expectancy per trade is 16 ticks.

Failure Conditions

• The strategy fails in strong trending markets.
• Avoid trading when the pivot point is very close to S1 or R1.

Psychological Rules

• Have patience to wait for the setup.
• Do not chase the price if the entry is missed.

Advanced Components

• Use a market regime filter to identify ranging markets.
• Use a volume filter to confirm the bounce.
• Avoid trading correlated instruments at the same time.
• The 60-minute chart must confirm the range-bound market.

Location

• The setup is strongest when the pivot point is in the middle of the previous day's range.
• The setup is weakest when the pivot point is at the extreme of the previous day's range.
• The location of the pivot point determines the risk-reward ratio of the trade.