Fear Capitulation Buy

Entry Logic

• Entry trigger: Buy when a stock breaks below a key support level on high volume and then reclaims the level.
• Confirmation: Volume on the reclaim candle must be higher than the breakdown candle.
• Timeframe: 5-minute chart for entry, 60-minute for context.
• Location: Entry occurs below the 200 EMA on the 60-minute chart.
• Market condition: High fear environment, VIX above 30.

Exit Logic

• Profit target: 3:1 risk-reward ratio.
• Scaling out: Sell 50% at 2R, move stop to breakeven.
• Trailing stop: Use a 10-period EMA on the 5-minute chart.
• Signal failure: Exit if the price closes back below the reclaimed support level.
• Opposite signal: No opposite signal for this strategy.
• Time expiration: Exit if the trade is not profitable within 60 minutes.
• Momentum loss: Exit if volume dries up after entry.

Stop Loss Structure

• Hard stop: 1 ATR below the low of the reclaim candle.
• Soft stop: None.
• Max dollar loss: $500 per trade.
• Max percent loss: 1% of account.
• Structural stop: Below the low of the capitulation volume candle.

Risk Management Framework

• Risk per trade: 0.5% of account.
• Daily limit: 3 losing trades.
• Weekly limit: 5% drawdown.
• Max drawdown: 15%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Fixed fractional.
• Volatility adjustment: Reduce size by 50% if VIX is above 40.
• Conviction sizing: A+ setups get 100% size, A setups get 50%.
• Scaling in: Not recommended.
• Scaling out: At 2R and 3R profit targets.

Trade Filtering

• Market conditions: Avoid low-volume, ranging markets.
• Setups: Only trade A+ or A setups.
• Instruments: High-beta stocks with high institutional ownership.
• Time restrictions: Avoid trading in the first 15 minutes of the open.
• Chop/news avoidance: Avoid trading around major news events.

Context Framework

• Trend direction: Counter-trend strategy.
• VWAP relationship: Entry is typically far below VWAP.
• MA relationship: Price is extended from the 20 and 50 EMAs.
• Range location: Entry occurs at the bottom of a multi-day range.
• Higher TF alignment: 60-minute chart shows extreme oversold conditions (RSI < 20).

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move in your favor.
• Scale out: At 2R and 3R.
• Add size: Not recommended.
• Fast vs slow moves: Expect a fast move on entry, manage aggressively.

Time Rules

• Optimal window: 10:00 AM - 11:00 AM EST.
• Times to avoid: First 15 minutes of the open, last 30 minutes of the day.
• Session notes: Most effective during morning panics.

Setup Classification

• A+ setup: High volume capitulation, strong reclaim, VIX > 30.
• A setup: Moderate volume capitulation, reclaim, VIX > 25.
• B setup: Low volume capitulation, weak reclaim.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Large-cap, high-beta stocks.
• Volume: Minimum 1 million shares per day.
• Volatility: ATR > 2% of stock price.

Statistical Edge Metrics

• Win rate: 40-50%.
• Avg win: 3R.
• Avg loss: 1R.
• Profit factor: 1.2 - 1.5.
• Expectancy: Positive.

Failure Conditions

• Strategy fails when the market continues to sell off after the reclaim.
• Avoid during black swan events.

Psychological Rules

• Must be comfortable buying when everyone else is selling.
• Requires patience to wait for the setup.

Advanced Components

• Regime detection: Use a market trend filter to identify bearish environments.
• Filters: Use a volatility filter to select the best candidates.
• Correlation: Avoid taking multiple correlated positions.
• MTF alignment: Higher timeframe charts should show oversold conditions.

Location

• Strongest: At major multi-month support levels.
• Weakest: In the middle of a range.