Range Expansion Breakout

Entry Logic

Trigger: Price breaks above or below a defined consolidation range. Confirmation: 2 consecutive candles close outside the range. Timeframe: 15-minute chart for range, 5-minute for entry. Location: Price action at range boundaries. Market Condition: Transitioning from consolidation to trend.

Exit Logic

Profit Target: Project the range height from the breakout point. Scaling Out: Scale 50% at 1.5R, 50% at 2.5R. Trailing Stop: Trailing 1 ATR below/above price. Signal Failure: Price re-enters the range and closes. Time Expiration: Close all positions after 4 hours if target not hit. Momentum Loss: Close if volume significantly decreases and price stalls.

Stop Loss Structure

Hard Stop: 0.5 ATR inside the range, opposite breakout direction. Soft Stop: Price retests the breakout level and fails to hold. Max Dollar Loss: $250 per trade. Max Percent Loss: 0.6% of account. Structural Stop: Just inside the range boundary.

Risk Management Framework

Risk Per Trade: 1.2% of account. Daily Limit: 3.5% max loss. Weekly Limit: 8% max loss. Max Drawdown: 12% from peak equity. R:R Requirement: Minimum 1:2.5.

Position Sizing Model

Sizing Approach: Volatility-adjusted fixed risk. Volatility Adjustment: Use ATR to determine share size. Conviction Sizing: Higher conviction trades get 1.5x normal size. Scaling In/Out: Scale out as per exit logic.

Trade Filtering

Market Conditions: Avoid extreme volatility or extremely low volatility. Setups: Clear, well-defined ranges with at least 10 candles. Instruments: High liquidity, moderate volatility stocks. Time Restrictions: Avoid pre-market/after-hours. Chop/News Avoidance: No trades during earnings reports.

Context Framework

Trend Direction: Breakout often initiates a new trend. VWAP Relationship: Breakout typically moves price away from VWAP. MA Relationship: Price consolidating between MAs. Higher TF: Daily chart shows prior consolidation.

Trade Management Rules

Breakeven: Move stop to breakeven at 0.75R. Scale Out: As per exit logic. Add Size: Never add to a losing trade. Fast vs Slow Moves: Adjust trailing stop based on speed.

Time Rules

Optimal Window: 10:00 AM - 12:00 PM EST, 2:00 PM - 3:30 PM EST. Times to Avoid: First 30 minutes of market open. Session Notes: Mid-day often sees range formation.

Setup Classification

A+/A/B/C Criteria: A+: Tight range, high volume breakout. A: Clear range, good volume. B: Wider range, decent volume. C: Unclear range, low volume.

Market Selection Criteria

Instruments: Large-cap stocks, index futures (ES, NQ). Volume: Average daily volume > 5 million shares. Volatility: ATR (14) between $0.75 and $3.00.

Statistical Edge Metrics

Win Rate: 50%. Avg Win: 2.2R. Avg Loss: 1R. Profit Factor: 1.6. Expectancy: 0.6R per trade.

Failure Conditions

Strategy Fails: False breakout (bull trap/bear trap). Price quickly re-enters range. Overall market is extremely choppy.

Psychological Rules

Mental Discipline: Trust the range boundaries. Avoid anticipation. Wait for confirmation.

Advanced Components

Regime Detection: Use ADX to confirm trending vs. ranging. Filters: Volume spike on breakout. Correlation: Look for sector-wide breakouts. MTF Alignment: 15-min range, 5-min entry, daily context.

Location

Strongest: After a period of calm, before a major move. Weakest: When ranges are too small or too large.