Factor-Based Intraday Rotation

Entry Logic

• Long entry: At the market open, identify the strongest performing investment factor (e.g., Momentum, Value, Growth). Buy the ETF that represents that factor.
• Short entry: Not applicable (long-only).
• Confirmation: The factor ETF is gapping up and showing strong volume.
• Timeframe: Daily for factor selection, 5-minute for entry.
• Location: At the open.
• Market Condition: A clear Buy the rumor, sell the news.

Exit Logic

• Profit Target: 2R or hold until the end of the day.
• Scaling Out: Not recommended.
• Trailing Stop: A tight trailing stop on the 5-minute chart.
• Signal Failure: If the factor ETF starts to underperform the market.
• Opposite Signal: Not applicable.
• Time Expiration: Exit by the end of the day.
• Momentum Loss: If the factor ETF loses its momentum.

Stop Loss Structure

• Hard Stop: A 1% stop loss.
• Soft Stop: If the factor ETF breaks its opening range low.
• Max Dollar Loss: $100 per trade.
• Max Percent Loss: 0.5% of account.
• Structural Stop: Below the opening range low.

Risk Management Framework

• Risk Per Trade: 0.5% of account.
• Daily Limit: 3 losing trades.
• Weekly Limit: 4% drawdown.
• Max Drawdown: 8%.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: Not a primary concern.
• Conviction Sizing: Not recommended.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions: A market with a clear factor preference for the day.
• Setups: The factor ETF must be showing clear strength at the open.
• Instruments: Factor ETFs (MTUM, QUAL, VLUE, etc.).
• Time Restrictions: First hour of the day.
• Chop/News Avoidance: Not a concern.

Context Framework

• Trend Direction: The strategy is based on the intraday trend of the factor.
• VWAP Relationship: The ETF should be trading above VWAP.
• MA Relationship: Not a primary concern.
• Range Location: Breakout from the opening range.
• Higher TF Alignment: Not required.

Trade Management Rules

• Breakeven: Move stop to breakeven at 1R.
• Scale Out: Not recommended.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a fast, momentum-based trade.

Time Rules

• Optimal Window: 9:30 AM - 10:30 AM EST.
• Times to Avoid: After the morning session.
• Session Notes: A pure momentum play on the day's winning factor.

Setup Classification

• A+ Setup: The leading factor is gapping up and running on high volume.
• A Setup: The leading factor is showing good strength.
• B Setup: The factor leadership is unclear.
• C Setup: No clear factor leadership.

Market Selection Criteria

• Instruments: The most liquid factor ETFs.
• Volume: High.
• Volatility: High.

Statistical Edge Metrics

• Win Rate: 40%.
• Avg Win: 3R.
• Avg Loss: 1R.
• Profit Factor: 1.2.
• Expectancy: 0.2R per trade.

Failure Conditions

• Market Conditions: A choppy market with no clear factor leadership.
• Specific Scenarios: The leading factor at the open reverses and becomes the laggard.

Psychological Rules

• Mental Discipline: Requires the ability to jump on a trend quickly.

Advanced Components

• Regime Detection: Not needed.
• Filters: Use a pre-market scanner to identify the strongest factors.
• Correlation: Not a concern.
• MTF Alignment: Not required.

Location

• Strongest: At the market open on a strong trend day.
• Weakest: In a choppy, directionless market.