Cup and Handle Intraday

Entry Logic

Trigger: Price breaks above the handle's resistance. Confirmation: High volume accompanies the breakout. Timeframe: 5-minute chart for pattern formation, 1-minute for entry. Location: Breakout occurs above the cup's rim. Market Condition: Trending market, preferably bullish.

Exit Logic

Profit Target: Project the cup's depth from the breakout point. Scaling Out: Scale 50% at 1R, 50% at 2R. Trailing Stop: Trailing 0.5 ATR below price. Signal Failure: Price closes back inside the handle. Time Expiration: Close all positions after 3 hours if target not hit. Momentum Loss: Close if volume drops significantly after breakout.

Stop Loss Structure

Hard Stop: 0.5 ATR below the handle's low. Soft Stop: Price retests the breakout level and fails. Max Dollar Loss: $200 per trade. Max Percent Loss: 0.5% of account. Structural Stop: Below the lowest point of the handle.

Risk Management Framework

Risk Per Trade: 1% of account. Daily Limit: 3% max loss. Weekly Limit: 7% max loss. Max Drawdown: 10% from peak equity. R:R Requirement: Minimum 1:2.

Position Sizing Model

Sizing Approach: Fixed risk per trade. Volatility Adjustment: Smaller size for higher ATR. Conviction Sizing: No conviction sizing. Scaling In/Out: Scale out as per exit logic.

Trade Filtering

Market Conditions: Avoid choppy, range-bound markets. Setups: Clear cup and handle formation only. Instruments: Highly liquid stocks, ETFs. Time Restrictions: Avoid news events. Chop/News Avoidance: No trades 15 minutes before/after major news.

Context Framework

Trend Direction: Align with 1-hour chart trend. VWAP Relationship: Price above VWAP. MA Relationship: Price above 20 EMA, 50 SMA. Range Location: Breakout from upper half of daily range. Higher TF: 1-hour chart confirms bullish trend.

Trade Management Rules

Breakeven: Move stop to breakeven at 0.5R. Scale Out: As per exit logic. Add Size: Never add to a winning trade. Fast vs Slow Moves: Tighten stops on fast moves.

Time Rules

Optimal Window: 9:30 AM - 11:30 AM EST, 1:00 PM - 3:00 PM EST. Times to Avoid: Lunch hour (12:00 PM - 1:00 PM EST), market close. Session Notes: Increased volatility at open/close.

Setup Classification

A+/A/B/C Criteria: A+: High volume breakout, perfect handle. A: Good volume, clear pattern. B: Decent volume, slightly imperfect handle. C: Avoid.

Market Selection Criteria

Instruments: SPY, QQQ, AAPL, MSFT, TSLA. Volume: Average daily volume > 10 million shares. Volatility: ATR (14) > $1.00.

Statistical Edge Metrics

Win Rate: 55%. Avg Win: 1.8R. Avg Loss: 1R. Profit Factor: 1.4. Expectancy: 0.27R per trade.

Failure Conditions

Strategy Fails: Breakout on low volume. Price closes back inside handle. Overall market turns bearish.

Psychological Rules

Mental Discipline: Adhere to stop loss. Avoid revenge trading. Stay patient.

Advanced Components

Regime Detection: Use VIX for volatility regime. Filters: Volume filter, 200 SMA filter. Correlation: Avoid highly correlated assets. MTF Alignment: 5-minute pattern, 1-minute entry, 1-hour trend.

Location

Strongest: Bullish markets, strong sectors. Weakest: Choppy markets, market uncertainty.