50 SMA Trend Continuation

Entry Logic

• Entry trigger: Price pulls back to the 50 SMA in a strong trend.
• Confirmation: A reversal candle pattern forms at the 50 SMA.
• Timeframe: 1-hour chart.
• Location context: The 50 SMA is acting as dynamic support or resistance.
• Market condition: A strong, long-term trend.

Exit Logic

• Profit target: The previous swing high or low.
• Scaling out: Not recommended.
• Trailing stop: Trail the stop on the other side of the 50 SMA.
• Signal failure: Exit if price closes on the wrong side of the 50 SMA.
• Opposite signal: Exit on a confirmed trend reversal.
• Time expiration: None.
• Momentum loss: Exit if momentum fades.

Stop Loss Structure

• Hard stop: 1.5 ATR from the entry price.
• Soft stop: A close on the wrong side of the 50 SMA.
• Max dollar loss: $200 per trade.
• Max percent loss: 2% of account.
• Structural stop: Below the most recent major swing low or high.

Risk Management Framework

• Risk per trade: 1.5% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 5% drawdown.
• Max drawdown: 15%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Fixed fractional (1.5% of account).
• Volatility adjustment: Adjust size based on ATR.
• Conviction sizing: None.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions: Avoid markets that are not in a strong trend.
• Setups: Only take pullbacks to the 50 SMA in a clear trend.
• Instruments: Stocks, indices, and commodities.
• Time restrictions: None.
• Chop/news avoidance: Avoid trading around major news.

Context Framework

• Trend direction: The long-term trend must be clearly established.
• VWAP relationship: Not relevant for this strategy.
• MA relationship: The 50 SMA should be clearly pointing up or down.
• Range location: The trade should be taken in the direction of the long-term trend.
• Higher TF alignment: The daily and weekly charts should confirm the trend.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1.5R move.
• Scale out: Not recommended.
• Add size: Not recommended.
• Fast vs slow moves: Hold the trade as long as the trend is intact.

Time Rules

• Optimal window: Any time during a strong trend.
• Times to avoid: Non-trending periods.
• Session notes: Works well in all sessions.

Setup Classification

• A+ setup: A perfect pullback to the 50 SMA with a strong reversal candle.
• A setup: A decent pullback with a good reversal candle.
• B setup: A pullback with a weak reversal candle.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Any liquid instrument with a clear trend.
• Volume: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Win rate: 50%.
• Avg win: 2.5R.
• Avg loss: 1R.
• Profit factor: 1.25.
• Expectancy: 0.25R.

Failure Conditions

• The strategy fails when the long-term trend ends.
• Avoid taking trades if the 50 SMA is flat.

Psychological Rules

• Be patient and wait for the pullback to the 50 SMA.
• Trust the long-term trend.

Advanced Components

• Regime detection: Use the 200 SMA to confirm the long-term trend.
• Filters: Only take trades in the direction of the 200 SMA.
• Correlation: Be aware of market correlations.
• MTF alignment: Check the daily and weekly charts.

Location

• Strongest: In a strong, long-term trend.
• Weakest: In a non-trending market.