Intraday Range Mean Reversion

Entry Logic

• Long Entry: Price reaches the bottom 10% of its average daily range.
• Short Entry: Price reaches the top 10% of its average daily range.
• Confirmation: A reversal candle pattern on the 5-minute chart.
• Timeframe: 15-minute for context, 5-minute for entry.
• Location: Extreme of the daily range.
• Market Condition: Ranging.

Exit Logic

• Profit Target: The midpoint of the daily range.
• Scaling Out: No.
• Trailing Stop: No.
• Signal Failure: Exit if price extends beyond its average daily range.
• Opposite Signal: Not applicable.
• Time Expiration: End of day.
• Momentum Loss: Exit if the reversion stalls.

Stop Loss Structure

• Hard Stop: 1 ATR (14) beyond the entry.
• Soft Stop: If price fails to revert within 30 minutes.
• Max Dollar Loss: $600.
• Max Percent Loss: 1.2%.
• Structural Stop: The high/low of the day.

Risk Management Framework

• Risk Per Trade: 1%.
• Daily Limit: 2 trades.
• Weekly Limit: 4%.
• Max Drawdown: 12%.
• R:R Requirement: 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: The strategy is based on the average daily range, which is a measure of volatility.
• Conviction Sizing: No.
• Scaling In: No.
• Scaling Out: No.

Trade Filtering

• Market Conditions: Avoid days with a strong directional bias.
• Setups: Requires the stock to be trading within its typical range.
• Instruments: Stocks with a predictable daily range.
• Time Restrictions: Best in the afternoon session.
• Chop/News Avoidance: Yes.

Context Framework

• Trend Direction: Neutral.
• VWAP Relationship: Fade moves away from VWAP.
• MA Relationship: Price is likely extended from its short-term MAs.
• Range Location: At the extremes of the daily range.
• Higher TF Alignment: The daily chart should show a pattern of range-bound behavior.

Trade Management Rules

• Breakeven: After a 1R move.
• Scale Out: No.
• Add Size: No.
• Fast vs Slow Moves: Works for both.

Time Rules

• Optimal Window: Afternoon session (1pm-3pm EST).
• Times to Avoid: The morning session, which is more prone to trend moves.
• Session Notes: A patient, late-day strategy.

Setup Classification

• A+ Setup: Price hits the edge of its range at a key support/resistance level.
• A Setup: Price hits the edge of its range with a reversal candle.
• B Setup: Price approaches the edge of its range and stalls.
• C Setup: Price is trending strongly and breaking out of its average daily range.

Market Selection Criteria

• Instruments: Stable, blue-chip stocks.
• Volume: Moderate.
• Volatility: Predictable and consistent.

Statistical Edge Metrics

• Win Rate: 65%.
• Avg Win: 1.8R.
• Avg Loss: 1R.
• Profit Factor: 1.67.
• Expectancy: +0.4R.

Failure Conditions

• Market Conditions: A day with a major news catalyst that causes an expansion of the daily range.
• Specific Scenarios: A stock breaking out of a multi-month consolidation.

Psychological Rules

• Discipline: Must be patient and wait for the setup to come to you.

Advanced Components

• Regime Detection: Use the ATR to identify days with unusually high or low volatility.
• Filters: Avoid stocks with upcoming earnings.
• Correlation: Be aware of the overall market tone.
• MTF Alignment: The 60-minute chart should also show range-bound activity.

Location

• Strongest: In mature, quiet markets.
• Weakest: In volatile, news-driven markets.