VWAP Scalp at Standard Deviation

Entry Logic

• Exact entry trigger: Price touches the second standard deviation band of the VWAP.
• Confirmation requirements: A bullish or bearish candlestick pattern forms at the standard deviation band.
• Timeframe required: 5-minute chart.
• Location context: The price is extended from the VWAP.
• Market condition requirement: Ranging or trending market.

Exit Logic

• Profit target(s): The VWAP line.
• Scaling out rules: No scaling out.
• Trailing stop rules: No trailing stop.
• Exit on signal failure: If the price does not move towards the VWAP within 15 minutes, exit the trade.
• Exit on opposite signal: If the price closes beyond the third standard deviation band, exit the trade.
• Exit on time expiration: Exit the trade after 30 minutes, regardless of the outcome.
• Exit on momentum loss: If the volume dries up, exit the trade.

Stop Loss Structure

• Hard stop location: 5 cents beyond the second standard deviation band.
• Soft stop rules: None.
• Maximum dollar loss per trade: $100.
• Maximum percent loss per trade: 1% of the account.
• Structural stop placement: Beyond the high or low of the entry candle.

Risk Management Framework

• Risk per trade: 0.5% of the account.
• Maximum daily loss limit: 2 consecutive losing trades.
• Maximum weekly loss limit: 3% of the account.
• Maximum drawdown allowed: 5% of the account.
• Risk-reward ratio requirement: 3:1.

Position Sizing Model

• Recommended sizing approach: Volatility-based position sizing.
• Volatility-based adjustment: Adjust position size based on the Average True Range (ATR).
• Conviction-based sizing (A+/A/B setup): A+ setups get 100% size, A setups get 75%, B setups get 50%.
• Scaling in rules: No scaling in.
• Scaling out rules: No scaling out.

Trade Filtering

• Market conditions to avoid: Low-volume, choppy markets.
• Specific setups required: A clear touch of the second standard deviation band.
• Stock/instrument requirements: High-volume stocks with tight spreads.
• Time of day restrictions: Avoid trading during the first 30 minutes of the market open.
• Chop/news avoidance rules: Avoid trading around major news events.

Context Framework

• Trend direction assessment: Trade in the direction of the 30-minute trend.
• VWAP relationship: Enter long trades at the lower standard deviation band, short trades at the upper standard deviation band.
• Moving average relationship: The price should be extended from the 20 EMA.
• Range location: Enter trades at the edges of a defined range.
• Higher timeframe alignment: The 60-minute chart should be in an uptrend for long trades, and a downtrend for short trades.

Trade Management Rules

• When to move stop to breakeven: After the price has moved 50% of the way to the profit target.
• When to scale out: No scaling out.
• When to add size: No adding size.
• How to handle fast moves vs slow moves: In fast moves, take profits at the VWAP. In slow moves, be patient and let the trade work.

Time Rules

• Optimal trading window: 10:00 AM - 11:30 AM EST.
• Times to avoid: 12:00 PM - 1:00 PM EST.
• Session-specific notes: The strategy works best during the morning session.

Setup Classification

• A+ setup criteria: All entry criteria are met, and the higher timeframe charts are aligned.
• A setup criteria: All entry criteria are met, but the higher timeframe charts are not aligned.
• B setup criteria: Only some of the entry criteria are met.
• C setup criteria: None of the entry criteria are met.

Market Selection Criteria

• Instrument requirements: Stocks with a daily volume of over 5 million shares.
• Volume/liquidity requirements: The stock must have a tight bid-ask spread.
• Volatility requirements: The stock must have a daily range of at least $1.

Statistical Edge Metrics

• Expected win rate: 65%.
• Average win size: $0.30.
• Average loss size: $0.10.
• Profit factor: 1.95.
• Expectancy per trade: $0.10.

Failure Conditions

• Market conditions where strategy fails: Low-volume, choppy markets.
• Specific scenarios to avoid: Trading against the trend.

Psychological Rules

• Key mental discipline requirements: Patience, discipline, and the ability to act quickly.

Advanced Components

• Market regime detection: Use the VIX to determine the market regime.
• Volatility/liquidity filters: Only trade stocks with high volume and volatility.
• Correlation filters: Avoid trading stocks that are highly correlated with each other.
• Multi-timeframe alignment: The 5-minute, 15-minute, and 60-minute charts should all be aligned.

Location

• Where this setup is strongest: In high-volume, trending markets.
• Where this setup is weakest: In low-volume, choppy markets.
• Location changes outcome: Trading against the trend will likely result in a loss.