Index Addition/Deletion Trade

Entry Logic

• Exact Entry Trigger: A stock is announced to be added to a major index (e.g., S&P 500).
• Confirmation: The stock price rallies on the news.
• Timeframe: Daily chart for analysis, 1-hour for entry.
• Location Context: Above the pre-announcement price.
• Market Condition: Bullish or neutral market.

Exit Logic

• Profit Target(s): 5% profit target.
• Scaling Out: Not recommended.
• Trailing Stop: Not recommended.
• Signal Failure: The stock is not added to the index.
• Opposite Signal: The stock price drops below the pre-announcement price.
• Time Expiration: The day the stock is added to the index.
• Momentum Loss: Not applicable.

Stop Loss Structure

• Hard Stop: 3% below the entry price.
• Soft Stop: Not recommended.
• Maximum Dollar Loss: $300 per trade.
• Maximum Percent Loss: 3% of the trade value.
• Structural Stop: Below the pre-announcement price.

Risk Management Framework

• Risk Per Trade: 0.3% of the account.
• Maximum Daily Loss: 1% of the account.
• Maximum Weekly Loss: 3% of the account.
• Maximum Drawdown: 10% of the account.
• R:R Requirement: Minimum 1.5:1.

Position Sizing Model

• Sizing Approach: Fixed dollar amount per trade.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: Bearish markets.
• Specific Setups: Only trade stocks being added to major indices.
• Instrument Requirements: Stocks with high liquidity.
• Time Restrictions: Not applicable.
• Chop/News Avoidance: Avoid stocks with a lot of negative news.

Context Framework

• Trend Direction: Not applicable.
• VWAP Relationship: Not applicable.
• MA Relationship: Not applicable.
• Range Location: Above the pre-announcement price.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Not applicable.
• Scale Out: Not applicable.
• Add Size: Not applicable.
• Fast vs Slow Moves: Not applicable.

Time Rules

• Optimal Window: Between the announcement date and the inclusion date.
• Times to Avoid: Not applicable.
• Session Notes: Not applicable.

Setup Classification

• A+ Criteria: All conditions met, major index.
• A Criteria: All conditions met.
• B Criteria: Missing one condition.
• C Criteria: Missing more than one condition.

Market Selection Criteria

• Instruments: Stocks.
• Volume: High trading volume.
• Volatility: Low volatility.

Statistical Edge Metrics

• Win Rate: 80-90%.
• Avg Win: 3-5%.
• Avg Loss: 1-2%.
• Profit Factor: 3.0-4.0.
• Expectancy: Positive.

Failure Conditions

• Market Conditions: Fails if the stock is not added to the index.
• Specific Scenarios: Fails if the market is in a downturn.

Psychological Rules

• Mental Discipline: Be patient. This is a slow-moving strategy.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Filter for stocks with a high probability of being added to an index.
• Correlation: Not applicable.
• MTF Alignment: Not applicable.

Location

• Where Strongest: In a market with a lot of index rebalancing.
• Where Weakest: In a market with little index rebalancing.