Shooting Star at Resistance

Entry Logic

• Exact entry trigger: Sell on the open of the candle following the Shooting Star candle.
• Confirmation requirements: The Shooting Star must have a long upper wick and a small body at the lower end of the range. It must form at a resistance level.
• Timeframe required: 15-minute or 60-minute chart.
• Location context: At a key resistance level in a downtrend.
• Market condition requirement: A downtrending market.

Exit Logic

• Profit target(s): The nearest support level.
• Scaling out rules: N/A.
• Trailing stop rules: Use a 10-period EMA as a trailing stop.
• Exit on signal failure: A close above the high of the Shooting Star.
• Exit on opposite signal: A Bullish Engulfing pattern.
• Exit on time expiration: If the trade is not profitable in 5-7 candles.
• Exit on momentum loss: Small candles after entry.

Stop Loss Structure

• Hard stop location: Above the high of the Shooting Star.
• Soft stop rules: N/A.
• Maximum dollar loss per trade: 1% of capital.
• Maximum percent loss per trade: N/A.
• Structural stop placement: Above the resistance level.

Risk Management Framework

• Risk per trade: 1%.
• Maximum daily loss limit: 2%.
• Maximum weekly loss limit: 5%.
• Maximum drawdown allowed: 15%.
• Risk-reward ratio requirement: 1:2.

Position Sizing Model

• Recommended sizing approach: Fixed risk.
• Volatility-based adjustment: N/A.
• Conviction-based sizing (A+/A/B setup): A+ for a pattern at major weekly resistance. A for a pattern at daily resistance. B for a pattern at intraday resistance.
• Scaling in rules: N/A.
• Scaling out rules: N/A.

Trade Filtering

• Market conditions to avoid: A strong uptrend.
• Specific setups required: A clear Shooting Star at resistance.
• Stock/instrument requirements: Any liquid instrument.
• Time of day restrictions: N/A.
• Chop/news avoidance rules: N/A.

Context Framework

• Trend direction assessment: Downtrend.
• VWAP relationship: Price should be below VWAP.
• Moving average relationship: Price should be below key moving averages.
• Range location: At the top of a trading range.
• Higher timeframe alignment: The daily chart should be in a downtrend.

Trade Management Rules

• When to move stop to breakeven: After a 1R move.
• When to scale out: N/A.
• When to add size: N/A.
• How to handle fast moves vs slow moves: Let it run.

Time Rules

• Optimal trading window: N/A.
• Times to avoid: N/A.
• Session-specific notes: N/A.

Setup Classification

• A+ setup criteria: A perfect Shooting Star at a major confluence of resistance with high volume.
• A setup criteria: A Shooting Star at a minor resistance level with average volume.
• B setup criteria: A Shooting Star with a small upper wick or a slightly bullish body.
• C setup criteria (avoid): A Shooting Star that forms in the middle of a range or against the prevailing trend.

Market Selection Criteria

• Instrument requirements: Any liquid instrument.
• Volume/liquidity requirements: High volume.
• Volatility requirements: N/A.

Statistical Edge Metrics

• Expected win rate: 55-60%
• Average win size: 2R
• Average loss size: 1R
• Profit factor: 1.5 - 2.0
• Expectancy per trade: 0.4R.

Failure Conditions

• Market conditions where strategy fails: Strong uptrends.
• Specific scenarios to avoid: Chasing a Shooting Star that has already moved significantly away from the resistance level.

Psychological Rules

• Key mental discipline requirements: Patience to wait for the setup to form at a valid resistance level. Discipline to exit immediately if the stop loss is hit.

Advanced Components

• Market regime detection: Use the ADX indicator to confirm a trending market (ADX > 25).
• Volatility/liquidity filters: N/A.
• Correlation filters: N/A.
• Multi-timeframe alignment: Ensure the weekly, daily, and hourly charts are all in a downtrend.

Location

• Where this setup is strongest: At the confluence of multiple resistance levels in a strong downtrend.
• Where this setup is weakest: In an uptrend or a choppy market with no clear resistance.
• Location changes outcome: A Shooting Star at a major resistance level has a much higher probability of success than one at a minor level.