Daily RSI + Intraday Divergence

Entry Logic

• Entry trigger: 5-minute chart shows a bullish divergence on the RSI indicator.
• Confirmation: The daily chart shows the RSI is in oversold territory (below 30).
• Timeframe: Daily for RSI context, 5-minute for divergence entry.
• Location: Entry taken on the 5-minute bullish divergence.
• Market condition: Oversold market that is due for a bounce.

Exit Logic

• Profit target: The next major resistance level on the daily chart.
• Scaling out: Scale out 50% at 2R.
• Trailing stop: Trail stop below the 5-minute 20 EMA.
• Signal failure: Exit if the 5-minute chart makes a new low.
• Opposite signal: Exit on a bearish divergence on the 5-minute chart.
• Time expiration: Exit if the trade is not profitable within 2 days.
• Momentum loss: Exit if the 5-minute chart shows declining volume.

Stop Loss Structure

• Hard stop: Below the low of the 5-minute divergence.
• Soft stop: A close below the divergence low.
• Max dollar loss: $200 per trade.
• Max percent loss: 1% of account.
• Structural stop: Below the most recent swing low on the daily chart.

Risk Management Framework

• Risk per trade: 1% of account.
• Daily limit: Not applicable for this strategy.
• Weekly limit: 3% drawdown.
• Max drawdown: 10%.
• R:R requirement: Minimum 3:1.

Position Sizing Model

• Sizing approach: Fixed fractional, 1% of account per trade.
• Volatility adjustment: Adjust size based on the daily ATR.
• Conviction sizing: Not used in this strategy.
• Scaling in: Not used in this strategy.
• Scaling out: 50% at 2R.

Trade Filtering

• Market conditions: Only trade when the daily RSI is oversold.
• Setups: Only take long trades on bullish divergence.
• Instruments: Large-cap stocks and ETFs.
• Time restrictions: Not applicable for this strategy.
• Chop/news avoidance: Be aware of news events that could impact the trade.

Context Framework

• Trend direction: The daily chart is in a downtrend, but a bounce is expected.
• VWAP relationship: Not a primary factor.
• MA relationship: Not a primary factor.
• Range location: Entry taken at an oversold extreme.
• Higher TF alignment: Not required for this counter-trend strategy.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1.5R move.
• Scale out: At 2R profit target.
• Add size: Not used in this strategy.
• Fast vs slow moves: Take profits on the bounce.

Time Rules

• Optimal window: Not applicable for this strategy.
• Times to avoid: Not applicable for this strategy.
• Session notes: Not applicable for this strategy.

Setup Classification

• A+ setup: Daily RSI below 20, clear 5-minute bullish divergence.
• A setup: Daily RSI below 30, good 5-minute divergence.
• B setup: Daily RSI is not yet oversold.
• C setup: No divergence.

Market Selection Criteria

• Instruments: SPY, QQQ, IWM.
• Volume: High daily volume.
• Volatility: High volatility.

Statistical Edge Metrics

• Win rate: 45%.
• Avg win: 4R.
• Avg loss: 1R.
• Profit factor: 1.8.
• Expectancy: 0.8R per trade.

Failure Conditions

• Strategy fails when the oversold condition persists and the divergence does not play out.
• Avoid using this strategy in a very strong, one-sided trend.

Psychological Rules

• Courage is needed to buy when the market is selling off hard.
• Discipline is required to cut the trade if the divergence fails.

Advanced Components

• Regime detection: Not applicable for this counter-trend strategy.
• Filters: Look for divergence on multiple timeframes.
• Correlation: Check if other correlated assets are also showing divergence.
• MTF alignment: Not required.

Location

• Strongest: In an oversold market.
• Weakest: In a strong, trending market.