ES VWAP Trend Day

Entry Logic

• Exact Entry Trigger: Enter long on a pullback to the VWAP after a new high of day is made. Enter short on a rally to the VWAP after a new low of day is made.
• Confirmation: The pullback must be on lower volume than the impulse move. The price must hold at the VWAP and show signs of rejection.
• Timeframe: 5-minute chart.
• Location Context: For longs, the price must be above the opening price and the 20 EMA. For shorts, the price must be below the opening price and the 20 EMA.
• Market Condition: A clear trend must be established for the day.

Exit Logic

• Profit Targets: First target at the previous high/low of the day. Second target at a 2:1 risk-reward ratio.
• Scaling Out: Scale out 50% at the first target.
• Trailing Stop: Trail the stop loss 10 ticks below the VWAP for longs, or 10 ticks above for shorts.
• Signal Failure Exit: Exit if the price closes on the other side of the VWAP.
• Opposite Signal Exit: Exit if a valid signal in the opposite direction appears.
• Time Expiration: Exit the trade by the end of the trading day.
• Momentum Loss: Exit if the price starts to consolidate and fails to make new highs/lows.

Stop Loss Structure

• Hard Stop: Place the stop loss 20 ticks below the VWAP for longs, or 20 ticks above for shorts.
• Soft Stop: Not used.
• Max Dollar Loss: $1000 per contract.
• Max Percent Loss: 1% of account capital.
• Structural Stop: The stop is placed behind a recent swing low for longs, or swing high for shorts.

Risk Management Framework

• Risk Per Trade: 0.5% of account capital.
• Maximum Daily Loss Limit: 2% of account capital.
• Maximum Weekly Loss Limit: 5% of account capital.
• Maximum Drawdown: 10% from peak equity.
• R:R Requirement: Minimum 1.5:1 risk-reward ratio.

Position Sizing Model

• Sizing Approach: Volatility-based position sizing.
• Volatility Adjustment: Adjust position size based on the Average True Range (ATR).
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: As per exit logic.

Trade Filtering

• Market Conditions to Avoid: Range-bound markets.
• Specific Setups Required: A clear trend day with price respecting the VWAP.
• Instruments: ES (S&P 500 E-mini futures).
• Time Restrictions: Trade from 10:00 AM to 3:00 PM EST.
• Chop/News Avoidance: Avoid trading during major news events.

Context Framework

• Trend Direction: Trade in the direction of the daily trend.
• VWAP Relationship: Price should be using VWAP as dynamic support in an uptrend, or resistance in a downtrend.
• MA Relationship: The 20 EMA should be above the 50 EMA for longs, and below for shorts.
• Range Location: Not applicable.
• Higher TF Alignment: The daily and 4-hour charts should confirm the trend direction.

Trade Management Rules

• Breakeven: Move stop to breakeven after the first profit target is hit.
• Scale Out: As per exit logic.
• Add Size: Not recommended.
• Fast vs Slow Moves: Let the trade run in fast moves. In slow moves, consider taking profits earlier.

Time Rules

• Optimal Trading Window: Mid-day from 10:00 AM to 3:00 PM EST.
• Times to Avoid: The opening and closing hours.
• Session Notes: This strategy is most effective during the US session.

Setup Classification

• A+ Setup: A clear trend day with multiple successful VWAP tests.
• A Setup: A good trend day with at least one successful VWAP test.
• B Setup: A weak trend day.
• C Setup: Avoid. A range-bound day.

Market Selection Criteria

• Instruments: ES (S&P 500 E-mini futures).
• Volume/Liquidity: High volume and liquidity are essential.
• Volatility: Moderate volatility is preferred.

Statistical Edge Metrics

• Win Rate: 60-65%.
• Avg Win: 2R.
• Avg Loss: 1R.
• Profit Factor: 1.8.
• Expectancy: 0.7R per trade.

Failure Conditions

• When Strategy Fails: When the market reverses trend.
• Specific Scenarios to Avoid: Trading against the dominant trend.
• Psychological Rules: Have patience and wait for the price to come to you.

Advanced Components

• Regime Detection: Use a trend filter to confirm the market regime.
• Filters: Use a volume profile to identify key support and resistance levels.
• Correlation: Not applicable.
• MTF Alignment: Ensure the higher timeframes are aligned with the trade direction.

Location

• Where Strongest: In strong trending markets.
• Where Weakest: In range-bound or choppy markets.