Crude Oil VWAP Trade

Entry Logic

• Exact Entry Trigger: Enter long on a pullback to the VWAP in an uptrend. Enter short on a rally to the VWAP in a downtrend.
• Confirmation: The price must show signs of rejection at the VWAP, such as a pin bar or an engulfing candle.
• Timeframe: 15-minute chart.
• Location Context: The setup should occur after a clear trend has been established.
• Market Condition: A trending market.

Exit Logic

• Profit Targets: The previous high for longs, or the previous low for shorts.
• Scaling Out: Not recommended.
• Trailing Stop: Trail the stop loss 15 ticks below the VWAP for longs, or 15 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 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 25 ticks below the VWAP for longs, or 25 ticks above for shorts.
• Soft Stop: Not used.
• Max Dollar Loss: $250 per contract.
• Max Percent Loss: 0.25% 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: 0.25% of account capital.
• Maximum Daily Loss Limit: 1% of account capital.
• Maximum Weekly Loss Limit: 3% of account capital.
• Maximum Drawdown: 10% from peak equity.
• R:R Requirement: Minimum 1.5:1 risk-reward ratio.

Position Sizing Model

• Sizing Approach: Fixed fractional sizing.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: Range-bound markets.
• Specific Setups Required: A clear trend with price respecting the VWAP.
• Instruments: CL (Crude Oil futures).
• Time Restrictions: Trade during the US session.
• 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: Not applicable.
• 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: The US session.
• Times to Avoid: The overnight session.
• Session Notes: This strategy is most effective during the US session due to the high volume and liquidity.

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: CL (Crude Oil futures).
• Volume/Liquidity: High volume and liquidity are essential.
• Volatility: Moderate to high 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

• Mental Discipline: Have patience and wait for the price to come to you. Do not chase trades.

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.