200 EMA Gap and Go

Entry Logic

• Entry trigger: Price gaps above the 200 EMA at the market open.
• Confirmation: The first 5-minute candle closes bullish and above the 200 EMA.
• Timeframe: 5-minute chart.
• Location context: The gap occurs in a stock that is in a long-term uptrend.
• Market condition: A bullish catalyst (e.g., earnings beat) has caused the gap.

Exit Logic

• Profit target: 2R or the next significant resistance level.
• Scaling out: Scale out 50% at 1R.
• Trailing stop: Trail the stop below the 200 EMA.
• Signal failure: Exit if the price closes below the 200 EMA.
• Opposite signal: Exit on a reversal signal.
• Time expiration: Exit by the end of the day.
• Momentum loss: Exit if momentum fades after the open.

Stop Loss Structure

• Hard stop: Below the low of the first 5-minute candle.
• Soft stop: A close below the 200 EMA.
• Max dollar loss: $200 per trade.
• Max percent loss: 2% of account.
• Structural stop: Below the low of the first 5-minute candle.

Risk Management Framework

• Risk per trade: 1.5% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 5% drawdown.
• Max drawdown: 15%.
• R:R requirement: Minimum 1.5:1.

Position Sizing Model

• Sizing approach: Fixed fractional (1.5% of account).
• Volatility adjustment: Adjust size based on the size of the gap.
• Conviction sizing: None.
• Scaling in: Not recommended.
• Scaling out: At 1R and 2R.

Trade Filtering

• Market conditions: Only trade on strong gap up days.
• Setups: Only take gaps above the 200 EMA.
• Instruments: Large-cap stocks with high volume.
• Time restrictions: Only trade in the first hour of the market open.
• Chop/news avoidance: The trade is based on news.

Context Framework

• Trend direction: The long-term trend is up.
• VWAP relationship: The trade is taken above VWAP.
• MA relationship: The 200 EMA is a key support level.
• Range location: The trade is taken on a gap out of the previous day's range.
• Higher TF alignment: The daily chart shows a strong uptrend.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.
• Scale out: At 1R and 2R.
• Add size: Not recommended.
• Fast vs slow moves: This is a momentum trade, so expect a fast move.

Time Rules

• Optimal window: 9:30 AM - 10:30 AM EST.
• Times to avoid: Any other time.
• Session notes: Only works at the market open.

Setup Classification

• A+ setup: A large gap up with high volume and a strong catalyst.
• A setup: A decent gap up with good volume.
• B setup: A small gap up with low volume.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Large-cap stocks with a history of gapping and running.
• Volume: Very high.
• Volatility: High.

Statistical Edge Metrics

• Win rate: 50%.
• Avg win: 2.5R.
• Avg loss: 1R.
• Profit factor: 1.25.
• Expectancy: 0.25R.

Failure Conditions

• The strategy fails when the gap is filled.
• Avoid taking trades if the overall market is weak.

Psychological Rules

• Be prepared for a fast-moving trade.
• Do not hesitate to take profits.

Advanced Components

• Regime detection: Use the overall market trend to filter trades.
• Filters: Only take trades if the S&P 500 is also gapping up.
• Correlation: Be aware of sector correlations.
• MTF alignment: The daily chart should show a strong uptrend.

Location

• Strongest: At the market open on a strong bullish day.
• Weakest: In a bearish or choppy market.