Range-Bound Market Structure Trade

Entry Logic

• Entry trigger: Price reaches the upper or lower boundary of a well-defined range and forms a reversal candle.
• Confirmation: A bearish/bullish engulfing candle on the 15-minute chart.
• Timeframe: 1-hour for the range, 15-minute for the entry.
• Location context: At the boundaries of a range.
• Market condition: Ranging.

Exit Logic

• Profit target: The opposite side of the range.
• Scaling out: Not recommended.
• Trailing stop: Not used.
• Signal failure exit: Exit if price breaks out of the range.
• Opposite signal exit: Not applicable.
• Time expiration: Exit if the target is not reached within the session.
• Momentum loss: Exit if price stalls in the middle of the range.

Stop Loss Structure

• Hard stop: Just beyond the high/low of the reversal candle.
• Soft stop: Not used.
• Max dollar loss: $110 per trade.
• Max percent loss: 0.55% of account.
• Structural stop: The high/low of the range.

Risk Management Framework

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

Position Sizing Model

• Sizing approach: Fixed risk per trade.
• Volatility adjustment: Standard sizing.
• Conviction sizing: Full size for A+ setups.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions to avoid: Trending markets.
• Setups required: A clear, well-defined range.
• Instruments: Range-bound stocks and forex pairs.
• Time restrictions: Mid-day trading.
• Chop/news avoidance: Avoid around news.

Context Framework

• Trend direction: Ranging.
• VWAP relationship: Price oscillates around the VWAP.
• MA relationship: The 50 SMA is flat.
• Range location: At the high or low of the range.
• Higher TF alignment: The higher timeframe is also in a range.

Trade Management Rules

• Breakeven: Move to breakeven at 1R.
• Scale out: Not applicable.
• Add size: Not applicable.
• Fast vs slow moves: Expect a move to the other side of the range.

Time Rules

• Optimal window: 11:00 AM to 2:00 PM EST.
• Times to avoid: Market open and close.
• Session notes: A classic range-trading setup.

Setup Classification

• A+ criteria: A sharp rejection at the range boundary with a strong reversal candle.
• A criteria: A clear rejection at the range boundary.
• B criteria: The rejection is weak.
• C criteria: The market is trending.

Market Selection Criteria

• Instruments: IWM, DIA, USD/CAD.
• Volume: Not a primary factor.
• Volatility: Low to moderate.

Statistical Edge Metrics

• Win rate: 65%.
• Avg win: 1.8R.
• Avg loss: 1R.
• Profit factor: 1.17.
• Expectancy: 0.17R per trade.

Failure Conditions

• The range breaks, and a new trend begins.
• The market becomes extremely choppy.

Psychological Rules

• Requires patience to wait for price to reach the range boundaries.
• Requires discipline to take profits at the other side of the range.

Advanced Components

• Regime detection: Use the Choppiness Index.
• Filters: Use Bollinger Bands to define the range.
• Correlation: Not a primary factor.
• MTF alignment: The higher timeframe should also be in a range.

Location

• Strongest: At the boundaries of a well-established range.
• Weakest: In a trending market.