1. R2/S2 Extension Trade

Entry Logic

Enter long when price closes above R2. Confirm with increasing volume. Use a 5-minute timeframe. Price must originate from below R1. Market must be trending up.

Exit Logic

Target R3. Scale out 50% at 0.5R. Trail stop below prior 5-minute low. Exit remaining position if price closes below R2. Exit at session close if target not met. Lose momentum? Exit.

Stop Loss Structure

Place hard stop 10 ticks below R2. Max dollar loss $200. Max 0.5% portfolio loss. Structural stop below the breakout candle low.

Risk Management Framework

Risk 1% per trade. Daily loss limit 3%. Weekly loss limit 7%. Require 2:1 R:R minimum.

Position Sizing Model

Size to risk 1% of capital. Volatility adjusts size; smaller size for higher ATR. Conviction sizing: A+ setups get 1.5% risk. Scale in rarely; only with strong confirmation.

Trade Filtering

Trade only NASDAQ 100 futures (NQ). Avoid chop zones. Avoid news releases. Only trade after 9:45 AM EST.

Context Framework

Trade with the higher timeframe trend. Price must be above VWAP. Price must be above 20-period EMA. Range expansion is favorable. Higher timeframe shows clear direction.

Trade Management Rules

Move to breakeven after 0.5R profit. Scale out 50% at 1R. Do not add to losing positions. Fast moves require tighter stops.

Time Rules

Optimal entry 9:45 AM - 11:30 AM EST. Avoid 12:00 PM - 1:30 PM EST. Session close 3:45 PM EST.

Setup Classification

A+ setup: Clear break above R2, high volume, strong higher TF trend. A setup: Clear break, good volume, moderate higher TF trend. B setup: Break, average volume, weak higher TF trend. C setup: Avoid.

Market Selection Criteria

Trade NQ, ES. Require average daily volume > 1M. Require ATR > 10 points.

Statistical Edge Metrics

Target 55% win rate. Average win 1.5R. Average loss 0.75R. Profit factor 1.25. Expectancy $25 per $100 risked.

Failure Conditions

Strategy fails if R2 break is false. Fails if volume is low. Fails if market reverses sharply.

Psychological Rules

Maintain discipline. Do not chase trades. Accept small losses. Avoid revenge trading.

Advanced Components

Regime detection confirms trending market. Filter out low volatility. Correlation with SPY confirms NQ move. MTF alignment shows all timeframes trending up.

Location

Strongest when R2 is tested from below. Weakest when R2 is retested from above after a false break.