EMA Fan Trade (Multiple EMAs Spreading)

Entry Logic

• Entry trigger: A fan of EMAs (e.g., 10, 20, 30, 40, 50, 60) starts to spread out, indicating a strong trend.
• Confirmation: Price is trading above the entire fan for longs, or below for shorts.
• Timeframe: 1-hour chart.
• Location context: The fan is spreading after a period of consolidation.
• Market condition: A strong, established trend.

Exit Logic

• Profit target: 3R or when the fan starts to contract.
• Scaling out: Not recommended.
• Trailing stop: Trail the stop on the other side of the fan.
• Signal failure: Exit if the fan starts to contract.
• Opposite signal: Exit on a reversal signal.
• Time expiration: None.
• Momentum loss: Exit if the fan flattens out.

Stop Loss Structure

• Hard stop: On the other side of the fan.
• Soft stop: A close back inside the fan.
• Max dollar loss: $250 per trade.
• Max percent loss: 2.5% of account.
• Structural stop: Below the recent consolidation range.

Risk Management Framework

• Risk per trade: 2% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 6% drawdown.
• Max drawdown: 18%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Fixed fractional (2% of account).
• Volatility adjustment: None.
• Conviction sizing: None.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions: Avoid choppy, sideways markets.
• Setups: Only take trades when the fan is clearly spreading.
• Instruments: Any liquid instrument.
• Time restrictions: None.
• Chop/news avoidance: Avoid trading around major news.

Context Framework

• Trend direction: The trend is confirmed by the spreading of the fan.
• VWAP relationship: Trade in the direction of VWAP.
• MA relationship: The EMAs are all aligned and spreading.
• Range location: The trade is taken on a breakout of a range.
• Higher TF alignment: The higher timeframe chart should confirm the trend.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1.5R move.
• Scale out: Not recommended.
• Add size: Not recommended.
• Fast vs slow moves: Let the trade run as long as the fan is spreading.

Time Rules

• Optimal window: Any time during a strong trend.
• Times to avoid: Choppy, non-trending periods.
• Session notes: Works well in all sessions.

Setup Classification

• A+ setup: A strong spread of the fan after a tight consolidation.
• A setup: A decent spread of the fan.
• B setup: A weak spread of the fan.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Any liquid instrument.
• Volume: High.
• Volatility: Increasing.

Statistical Edge Metrics

• Win rate: 50%.
• Avg win: 3R.
• Avg loss: 1R.
• Profit factor: 1.5.
• Expectancy: 0.5R.

Failure Conditions

• The strategy fails in choppy, sideways markets.
• Avoid taking trades if the fan is not clearly spreading.

Psychological Rules

• Be patient and wait for the fan to spread.
• Do not get shaken out by minor pullbacks.

Advanced Components

• Regime detection: Use the ADX to confirm the trend strength.
• Filters: Only take trades if the ADX is above 25.
• Correlation: Be aware of market correlations.
• MTF alignment: Check the higher timeframe trend.

Location

• Strongest: In a strong, established trend.
• Weakest: In a choppy, sideways market.