Butterfly Fibonacci Pattern

Entry Logic

• Exact Entry Trigger: Completion of a Butterfly pattern, a harmonic pattern with specific Fibonacci ratios.
• Confirmation: A reversal candle in the potential reversal zone (PRZ).
• Timeframe: Any.
• Location Context: The pattern is defined by its internal Fibonacci relationships.
• Market Condition: Any.

Exit Logic

• Profit Target(s): The A and C points of the pattern.
• Scaling Out: Scale out at each target.
• Trailing Stop: A moving average.
• Exit on Signal Failure: A close beyond the PRZ.
• Exit on Opposite Signal: A reversal signal.
• Exit on Time Expiration: None.
• Exit on Momentum Loss: Divergence.

Stop Loss Structure

• Hard Stop: Beyond the PRZ.
• Soft Stop: A close beyond the PRZ.
• Maximum Dollar Loss: Varies.
• Maximum Percent Loss: Varies.
• Structural Stop: Behind a structural level.

Risk Management Framework

• Risk Per Trade: Varies.
• Maximum Daily Loss Limit: Varies.
• Maximum Weekly Loss Limit: Varies.
• Maximum Drawdown: Varies.
• Risk-Reward Ratio: Minimum 1:2.

Position Sizing Model

• Sizing Approach: Varies.
• Volatility-Based Adjustment: Yes.
• Conviction-Based Sizing: Yes.
• Scaling In: No.
• Scaling Out: Yes.

Trade Filtering

• Market Conditions to Avoid: None.
• Specific Setups Required: A valid Butterfly pattern.
• Instrument Requirements: Any.
• Time of Day Restrictions: None.
• Chop/News Avoidance: Be aware of news.

Context Framework

• Trend Direction: Varies.
• VWAP Relationship: Varies.
• Moving Average Relationship: Varies.
• Range Location: Can be used in ranges.
• Higher Timeframe Alignment: Recommended.

Trade Management Rules

• Breakeven: After 1R.
• Scale Out: At targets.
• Add Size: No.
• Fast vs. Slow Moves: Adjust accordingly.

Time Rules

• Optimal Trading Window: Any.
• Times to Avoid: None.
• Session-Specific Notes: None.

Setup Classification

• A+ Setup: A perfect Butterfly pattern with strong confirmation in the PRZ.
• A Setup: A good Butterfly pattern with decent confirmation.
• B Setup: An imperfect Butterfly pattern.
• C Setup: An invalid Butterfly pattern.

Market Selection Criteria

• Instrument Requirements: Any.
• Volume/Liquidity: Good.
• Volatility: Moderate.

Statistical Edge Metrics

• Expected Win Rate: 60-70%
• Average Win: 2R
• Average Loss: 1R
• Profit Factor: 1.2-1.4
• Expectancy Per Trade: +0.2-0.4R

Failure Conditions

• Market Conditions: A strong trend that invalidates the pattern.
• Specific Scenarios: A news event.

Psychological Rules

• Mental Discipline: The ability to identify and trade this complex pattern.

Advanced Components

• Market Regime Detection: None.
• Volatility/Liquidity Filters: None.
• Correlation Filters: None.
• Multi-Timeframe Alignment: Recommended.

Location

• Where Strongest: At major market turning points.
• Where Weakest: In a strong, one-directional trend.