Lunch Hour Fade (11:30-1:00)

Entry Logic

• Entry trigger: Price reaches a key support or resistance level and shows signs of reversal.
• Confirmation: A reversal candle pattern on the 15-minute chart.
• Timeframe: 15-minute chart.
• Location context: Trade against the morning trend.
• Market condition: A trending morning session that is showing signs of exhaustion.

Exit Logic

• Profit target: 50% retracement of the morning trend.
• Scaling out: Not recommended.
• Trailing stop: Not used.
• Signal failure exit: Exit if the price breaks the support/resistance level.
• Opposite signal exit: Not applicable.
• Time expiration: Exit if the target is not hit by 2:00 PM EST.
• Momentum loss: Exit if the price stalls for more than an hour.

Stop Loss Structure

• Hard stop: Beyond the support/resistance level.
• Soft stop: Not used.
• Max dollar loss: $100 per trade.
• Max percent loss: 0.5% of account.
• Structural stop: Beyond the nearest swing high/low.

Risk Management Framework

• Risk per trade: 0.5% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 3% drawdown.
• Max drawdown: 10%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Risk-based.
• Volatility adjustment: Reduce size during the lunch hour.
• Conviction sizing: Not applicable.
• Scaling in/out: No scaling.

Trade Filtering

• Market conditions: Avoid strong trending days.
• Setups: Only trade clear reversals at key levels.
• Instruments: Stocks that are known to be mean-reverting.
• Time restrictions: Entry between 11:30 AM and 1:00 PM EST.
• Chop/news avoidance: Avoid on days with afternoon 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 50 EMA.
• Range location: Trade from the edge of the range back to the mean.
• 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 1R.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: This is a slow, patient trade.

Time Rules

• Optimal trading window: 11:30 AM - 1:00 PM EST.
• Times to avoid: Before 11:30 AM and after 1:00 PM EST.
• Session notes: This is a low-probability, high-reward setup.

Setup Classification

• A+ criteria: Perfect reversal at a key level with strong confirmation.
• A criteria: Clear reversal at a key level.
• B criteria: Weak reversal signal.
• C criteria: No clear reversal (avoid).

Market Selection Criteria

• Instruments: Major index ETFs.
• Volume: Low volume is expected during this time.
• Volatility: Low volatility is ideal.

Statistical Edge Metrics

• Win rate: 40%.
• Avg win: 3R.
• Avg loss: 1R.
• Profit factor: 1.2.
• Expectancy: 0.2R per trade.

Failure Conditions

• Fails if the morning trend is too strong and continues through the lunch hour.
• Avoid on strong trend days.

Psychological Rules

• Must be comfortable taking counter-trend trades.
• Requires patience and discipline.

Advanced Components

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

Location

• Strongest: At a key historical support/resistance level.
• Weakest: In the absence of a clear level.