Volume Profile Value Area Trade

Entry Logic

• Entry is a long position when the price opens below the previous day's value area and then enters it from below.
• Confirmation is a close inside the value area.
• Timeframe is the 60-minute chart.
• Location is at the value area low (VAL).
• Market is expected to be a range day.

Exit Logic

• Profit target is the previous day's Point of Control (POC).
• Scale out 50% at the midpoint between the VAL and the POC.
• Trail the stop loss below the low of the previous bar.
• Exit if the price closes back below the VAL.
• Exit on a bearish reversal pattern at the POC.
• Exit at the end of the day.
• Exit if the price stalls for more than 2 hours.

Stop Loss Structure

• Hard stop is placed below the entry bar's low.
• Soft stop is a close below the VAL.
• Maximum dollar loss is $250 per trade.
• Maximum percent loss is 2.5% of the account.
• Structural stop is below the low of the day.

Risk Management Framework

• Risk 2% of the account per trade.
• Daily loss limit is 5% of the account.
• Weekly loss limit is 10% of the account.
• Maximum drawdown is 30%.
• Risk-reward ratio must be at least 1:1.

Position Sizing Model

• Use a fixed risk position sizing model.
• No volatility adjustment.
• Full size for all setups.
• Do not scale in.
• Scale out as per the exit logic.

Trade Filtering

• Avoid trading on strong trend days.
• Only trade when the previous day was a range day.
• Trade only major stock indices.
• Avoid trading in the first hour of the session.
• Do not trade if the opening price is far away from the value area.

Context Framework

• Trend is sideways.
• Price is moving towards VWAP.
• Price is crossing the 20 and 50 EMAs.
• Location is at the VAL.
• The higher timeframe chart (daily) shows a consolidation.

Trade Management Rules

• Move stop to breakeven after the first profit target is hit.
• Scale out at the POC.
• Do not add to the position.
• Be prepared for a range-bound price action.

Time Rules

• Optimal trading window is from 10:30 AM to 3:00 PM EST.
• Avoid trading in the last 30 minutes of the session.
• The strategy is best suited for range-bound days.

Setup Classification

• A+ setup: Open below the value area, followed by a strong move inside.
• A setup: Open slightly below the value area, with a moderate move inside.
• B setup: Open far below the value area, with a weak move inside.
• C setup: Open inside the value area.

Market Selection Criteria

• Trade SPY, QQQ, and DIA.
• High volume is required.
• Low to moderate volatility is preferred.

Statistical Edge Metrics

• Expected win rate is 70%.
• Average win is 1.2R.
• Average loss is 1R.
• Profit factor is 0.84.
• Expectancy per trade is -0.16R.

Failure Conditions

• The strategy fails on strong trend days.
• Avoid trading when there is a major news event scheduled.

Psychological Rules

• Be patient and wait for the market to come to your level.
• Do not force a trade if the setup is not perfect.

Advanced Components

• Use a market profile to identify the value area.
• Use a volume filter to confirm the strength of the VAL.
• Do not trade correlated indices in the same direction.
• The daily chart must confirm the consolidation.

Location

• Strongest when the market is rotating and not trending.
• Weakest on strong trend days.
• The location of the open relative to the value area is a key factor.