Mid-Morning Reversal (10:00-10:30)

Entry Logic

• Entry trigger: Failure of the opening range breakout, with price returning inside the range.
• Confirmation: Strong reversal candle (e.g., hammer, shooting star) on the 15-minute chart.
• Timeframe: 15-minute chart for setup, 5-minute for entry.
• Location context: Reversal occurs at a key support or resistance level.
• Market condition: A failed breakout attempt in a range-bound or weakly trending market.

Exit Logic

• Profit target: The opposite side of the opening range.
• Scaling out: Not recommended.
• Trailing stop: Not used.
• Signal failure exit: Exit if the price breaks out of the range again in the original direction.
• Opposite signal exit: Not applicable.
• Time expiration: Exit if the target is not hit by 12:00 PM EST.
• Momentum loss: Exit if the price stalls for more than 45 minutes.

Stop Loss Structure

• Hard stop: 1 tick beyond the high/low of the failed breakout.
• Soft stop: Not used.
• Max dollar loss: $200 per trade.
• Max percent loss: 1% of account.
• Structural stop: Beyond the nearest swing high/low.

Risk Management Framework

• Risk per trade: 1% 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: Risk-based.
• Volatility adjustment: Reduce size on very volatile days.
• Conviction sizing: Not applicable.
• Scaling in/out: No scaling.

Trade Filtering

• Market conditions: Avoid strong trending markets.
• Setups: Only trade clear failed breakouts.
• Instruments: Stocks that are mean-reverting.
• Time restrictions: Entry between 10:00 and 10:30 AM EST.
• Chop/news avoidance: Avoid on days with significant news events.

Context Framework

• Trend direction: Counter-trend trade.
• VWAP relationship: Look for price to cross back over VWAP.
• Moving average relationship: Price crossing back over the 20 EMA.
• Range location: Trade from one side of the range to the other.
• Higher TF alignment: The 60-minute chart should show signs of a potential reversal.

Trade Management Rules

• Breakeven: Move stop to breakeven after the price has moved 50% of the way to the target.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: This is a patient, slow-moving trade.

Time Rules

• Optimal trading window: 10:00-10:30 AM EST.
• Times to avoid: Before 10:00 AM and after 11:00 AM EST.
• Session notes: Works best on days when the initial move is exhausted.

Setup Classification

• A+ criteria: Classic failed breakout with strong reversal candle and volume.
• A criteria: Failed breakout with a clear reversal candle.
• B criteria: Failed breakout with a weak reversal candle.
• C criteria: No clear failed breakout (avoid).

Market Selection Criteria

• Instruments: SPY, QQQ, and other major index ETFs.
• Volume: High liquidity is essential.
• Volatility: Moderate volatility is ideal.

Statistical Edge Metrics

• Win rate: 60%.
• Avg win: 1.5R.
• Avg loss: 1R.
• Profit factor: 0.9.
• Expectancy: -0.1R per trade.

Failure Conditions

• Fails if the initial trend is too strong and the breakout holds.
• Avoid in strongly trending markets.

Psychological Rules

• Must be comfortable taking counter-trend trades.
• Requires patience to wait for the setup to confirm.

Advanced Components

• Regime detection: Use a mean-reversion indicator to identify suitable market conditions.
• Filters: Filter trades based on the strength of the initial move.
• Correlation: Be aware of market-wide sentiment.
• MTF alignment: Look for divergence on a higher timeframe.

Location

• Strongest: At key support/resistance levels.
• Weakest: In the middle of a range.