R1/S1 Breakout Trade

Entry Logic

Enter long when price closes above the Daily R1 pivot with significant volume. Confirm with a strong bullish candle on the 5-minute chart. Price must be above the 50-period EMA. Market must be exhibiting strong directional momentum.

Exit Logic

Target R2 as the primary profit target. Scale out 60% at R2. Trail stop using the 10-period EMA on a 5-minute chart. Exit remaining position if a bearish divergence on RSI forms. Close all trades 30 minutes before market close.

Stop Loss Structure

Place hard stop 12 ticks below the R1 pivot. Max dollar loss is $130. Max percent loss is 0.65% of account. Structural stop is below the breakout candle's low.

Risk Management Framework

Risk 1% of account per trade. Daily loss limit is 3.5% of account. Weekly loss limit is 7% of account. Max drawdown is 12%. Require a minimum 1.7:1 R:R.

Position Sizing Model

Size based on fixed dollar risk. Reduce size by 10% if the ATR is unusually high. Increase size by 10% for A+ setups with exceptional volume. Scale in 70% on initial breakout, 30% on a retest of R1 as support.

Trade Filtering

Trade highly liquid stocks (e.g., NASDAQ 100 components). Volume must be above 6 million shares. Avoid trading during the first 15 minutes of market open. Avoid instruments with low relative strength.

Context Framework

Trade strictly in the direction of the daily trend. Price must be above the daily VWAP. The 15-minute and 60-minute charts must confirm the trend. Look for higher highs and higher lows.

Trade Management Rules

Move stop to breakeven when price moves 0.75R in profit. Scale out 50% at 1.25R. Do not add to trades that are showing signs of weakness. Be quick to adjust stops on volatile moves.

Time Rules

Optimal trading window is 9:30 AM to 11:00 AM EST. Avoid trading between 12:00 PM and 1:30 PM EST. Avoid trading in the last 45 minutes of the session.

Setup Classification

A+: Price breaks R1 with exceptionally high volume. Strong bullish candle. Clear daily trend. A: Price breaks R1 with high volume. Good bullish candle. Established daily trend. B: Price breaks R1 with moderate volume. Decent bullish candle. Emerging daily trend. C: Weak R1 break, low volume, unclear trend. Avoid.

Market Selection Criteria

Focus on highly volatile and liquid stocks. Average daily volume must exceed 5 million shares. ATR must be at least 1.5% of the instrument's price.

Statistical Edge Metrics

Target 57% win rate. Average win $200. Average loss $130. Profit factor 2.1. Expectancy $60 per trade.

Failure Conditions

Price fails to hold above R1 after breakout. Volume is low on the breakout. Market loses momentum quickly. Price reclaims R1 from above.

Psychological Rules

Be aggressive on A+ setups. Do not let emotions dictate trade decisions. Stick to predefined profit targets. Review every trade.

Advanced Components

Use ADX > 30 to confirm strong trend. Filter for instruments with strong sector tailwinds. Check for alignment with weekly R1/S1 levels.

Location

Strongest when R1 breakout occurs in a strong uptrend with high volume. Weakest when R1 breakout is against the higher timeframe trend or on low volume.