Momentum Gap Continuation

Entry Logic

• Entry trigger: A stock gaps up or down on high volume and then continues to move in the direction of the gap.
• Confirmation: The stock trades above the high of the first 5-minute bar (for a gap up) or below the low (for a gap down).
• Timeframe: 5-minute chart.
• Location context: The entry occurs after the opening range breakout.
• Market condition: The market is gapping in the same direction as the stock.

Exit Logic

• Profit targets: 2R and 4R.
• Scaling out: Sell 50% at 2R.
• Trailing stop: Use the 9-period EMA as a trailing stop.
• Signal failure exit: Exit if the stock closes back inside the opening range.
• Opposite signal exit: Not applicable.
• Time expiration: Exit by the end of the day.
• Momentum loss: Exit if momentum slows down.

Stop Loss Structure

• Hard stop: Below the low of the opening range (for a gap up) or above the high (for a gap down).
• Soft stop: A close back inside the opening range.
• Max dollar loss: 1% of account equity.
• Max percent loss: 2% of the trade's value.
• Structural stop: Below the low of the opening range.

Risk Management Framework

• Risk per trade: 0.5% of account equity.
• Daily limit: 3 losing trades.
• Weekly limit: 10 losing trades.
• Max drawdown: 5% of account equity.
• R:R requirement: 2:1.

Position Sizing Model

• Sizing approach: Fixed fractional sizing.
• Volatility adjustment: Not applicable.
• Conviction sizing: A+ setups get full size, A setups get 75%, B setups get 50%.
• Scaling in/out: Scale out at profit targets.

Trade Filtering

• Market conditions: Avoid days when the market is gapping in the opposite direction of the stock.
• Setups: Only trade clear gap continuations.
• Instruments: Stocks that are gapping up or down on news.
• Time restrictions: Trade in the first hour of the session.
• Chop/news avoidance: Not applicable.

Context Framework

• Trend direction: The direction of the gap is the trend direction.
• VWAP relationship: Price should be on the correct side of VWAP.
• MA relationship: Not applicable.
• Range location: The entry occurs after the opening range breakout.
• Higher TF alignment: The daily chart should be supportive of the gap direction.

Trade Management Rules

• Breakeven: Move stop to breakeven after 1R.
• Scale out: At profit targets.
• Add size: Do not add size.
• Fast vs slow moves: Let fast moves run.

Time Rules

• Optimal window: 9:30 AM to 10:30 AM EST.
• Times to avoid: After 10:30 AM EST.
• Session notes: This is a morning-only strategy.

Setup Classification

• A+ criteria: A large gap with high volume and a strong continuation.
• A criteria: A good gap with decent volume and a good continuation.
• B criteria: A small gap with low volume and a weak continuation.
• C criteria: Avoid.

Market Selection Criteria

• Instruments: Stocks with a catalyst, such as earnings or news.
• Volume: High pre-market volume.
• Volatility: High ATR.

Statistical Edge Metrics

• Win rate: 55%
• Avg win: 3R
• Avg loss: 1R
• Profit factor: 1.65
• Expectancy: 0.825R per trade

Failure Conditions

• When strategy fails: Fails when the gap fills and the stock reverses.

Psychological Rules

• Mental discipline: Be prepared for a fast-moving market at the open.

Advanced Components

• Regime detection: Not applicable.
• Filters: Pre-market volume filter.
• Correlation: Not applicable.
• MTF alignment: Check the daily chart.

Location

• Where strongest: At the open of the market.
• Where weakest: In the middle of the trading day.