Pre-Market Trend Continuation

Entry Logic

• Entry trigger: Stock in a clear pre-market uptrend or downtrend makes a new 15-minute high or low.
• Confirmation: Entry on a pullback to the 9-period EMA on the 5-minute chart.
• Timeframe: 15-minute for trend identification, 5-minute for entry.
• Location context: Trade in the direction of the established pre-market trend.
• Market condition: A strongly trending pre-market session.

Exit Logic

• Profit target: The next logical resistance/support level on the 15-minute chart.
• Scaling out: Scale out 1/3 at 1R, 1/3 at 2R, and let the rest run.
• Trailing stop: Trail the stop below the 20-period EMA on the 5-minute chart.
• Signal failure exit: Exit if the 9-period EMA is decisively broken.
• Opposite signal exit: Exit if a reversal pattern forms, such as a double top or bottom.
• Time expiration: Close the trade 30 minutes before the market open.
• Momentum loss: Exit if the trend flattens out and the stock starts moving sideways.

Stop Loss Structure

• Hard stop: Below the most recent 5-minute swing low for longs, above for shorts.
• Soft stop: A close below the 9-period EMA on the 5-minute chart.
• Max dollar loss: $250 per trade.
• Max percent loss: 0.5% of account capital.
• Structural stop: Below the low of the pullback that set up the entry.

Risk Management Framework

• Risk per trade: 0.25% of account equity.
• Maximum daily loss limit: 1% of account equity.
• Maximum weekly loss limit: 2.5% of account equity.
• Maximum drawdown: 8% from peak equity.
• Risk-reward ratio: Minimum 2:1 on the first profit target.

Position Sizing Model

• Sizing approach: Fixed risk per trade.
• Volatility adjustment: Not applicable.
• Conviction sizing: Not applicable.
• Scaling in: Not recommended.
• Scaling out: At 1R and 2R profit targets.

Trade Filtering

• Market conditions to avoid: Choppy, range-bound pre-market sessions.
• Specific setups required: A smooth, consistent trend with orderly pullbacks.
• Stock/instrument requirements: Stocks with high relative volume in the pre-market.
• Time of day restrictions: 7:30 AM to 9:00 AM ET.
• Chop/news avoidance: Avoid trading just before a major news release.

Context Framework

• Trend direction: Aligned with the pre-market trend.
• VWAP relationship: Price should be consistently above VWAP for longs, below for shorts.
• Moving average relationship: The 9-period EMA should be above the 20-period EMA on the 5-minute chart for longs.
• Range location: Not applicable.
• Higher TF alignment: The daily chart should not have major resistance/support just above/below the entry.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.
• Scale out: At profit targets.
• Add size: Not applicable.
• Fast vs slow moves: Let the trend do the work; do not exit prematurely.

Time Rules

• Optimal window: 8:00 AM to 8:45 AM ET.
• Times to avoid: The first hour of pre-market (before 8:00 AM ET).
• Session notes: This strategy works well when a stock has a catalyst and is attracting institutional interest.

Setup Classification

• A+ criteria: A very strong, smooth trend with multiple successful pullbacks.
• A criteria: A decent trend with some choppiness.
• B criteria: A weak or choppy trend.
• C criteria: Avoid all other setups.

Market Selection Criteria

• Instrument requirements: Any stock with good pre-market liquidity.
• Volume/liquidity: Minimum 30k shares traded by 8:00 AM ET.
• Volatility: Moderate volatility.

Statistical Edge Metrics

• Win rate: 65%.
• Avg win: 1.8R.
• Avg loss: 1R.
• Profit factor: 1.17.
• Expectancy: 0.17R per trade.

Failure Conditions

• The strategy fails when the pre-market trend reverses unexpectedly.
• Avoid when the trend is based on low volume.

Psychological Rules

• Trust the trend, but be prepared for it to end.
• Do not add to a losing position.

Advanced Components

• Regime detection: Not applicable.
• Filters: Filter for stocks that are in the top 10% of pre-market movers.
• Correlation: Not applicable.
• MTF alignment: Not critical, but helpful.

Location

• Strongest: In stocks with a clear catalyst and institutional attention.
• Weakest: In random, low-volume stocks.