Moving Average Distance Oscillator Trade

Entry Logic

• Entry trigger: The moving average distance oscillator reaches an extreme reading, indicating an overbought or oversold condition.
• Confirmation: A reversal candle pattern forms as the oscillator starts to move back towards the zero line.
• Timeframe: 30-minute chart.
• Location context: The market is in a trending or range-bound condition.
• Market condition: The market is overextended.

Exit Logic

• Profit target: The moving average from which the distance is being measured.
• Scaling out: Not recommended.
• Trailing stop: Not applicable.
• Signal failure: Exit if the oscillator makes a new extreme.
• Opposite signal: Exit on a signal in the opposite direction.
• Time expiration: Exit if the trade is not profitable within a few candles.
• Momentum loss: Not applicable.

Stop Loss Structure

• Hard stop: Just beyond the extreme of the price move.
• Soft stop: A new extreme in the oscillator.
• Max dollar loss: $150 per trade.
• Max percent loss: 1.5% of account.
• Structural stop: Not applicable.

Risk Management Framework

• Risk per trade: 1% of account.
• Daily limit: 3 losing trades.
• Weekly limit: 5% drawdown.
• Max drawdown: 15%.
• R:R requirement: Minimum 1:1.

Position Sizing Model

• Sizing approach: Fixed fractional (1% of account).
• Volatility adjustment: None.
• Conviction sizing: None.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions: Avoid taking trades in a very strong, one-sided trend.
• Setups: Only take trades at extreme oscillator readings.
• Instruments: Any liquid instrument.
• Time restrictions: None.
• Chop/news avoidance: Avoid trading around major news.

Context Framework

• Trend direction: The trade is a counter-trend or mean-reversion trade.
• VWAP relationship: The trade is taken far from VWAP, with the expectation of a reversion to it.
• MA relationship: The price is far from the moving average.
• Range location: The trade is taken at the extremes of a range or a temporary overextension.
• Higher TF alignment: The higher timeframe chart should show a potential for a pullback.

Trade Management Rules

• Breakeven: Not applicable.
• Scale out: Not recommended.
• Add size: Not recommended.
• Fast vs slow moves: This is a short-term trade.

Time Rules

• Optimal window: Any time the market is overextended.
• Times to avoid: Strong, trending markets.
• Session notes: Works well in all sessions.

Setup Classification

• A+ setup: An extreme oscillator reading with a strong reversal candle.
• A setup: A decent oscillator reading with a good reversal candle.
• B setup: A weak oscillator reading.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Any liquid instrument.
• Volume: Moderate.
• Volatility: Moderate to high.

Statistical Edge Metrics

• Win rate: 65%.
• Avg win: 1R.
• Avg loss: 1R.
• Profit factor: 1.85.
• Expectancy: 0.85R.

Failure Conditions

• The strategy fails in a strong, one-sided trend.
• Avoid taking trades if the oscillator is not at an extreme level.

Psychological Rules

• Be disciplined and take profits at the moving average.
• Do not try to catch a bigger move.

Advanced Components

• Regime detection: Use the ADX to identify a non-trending market.
• Filters: Only take trades if the ADX is below 20.
• Correlation: Be aware of market correlations.
• MTF alignment: Check the higher timeframe chart for confirmation.

Location

• Strongest: In a range-bound market or during a pullback in a trend.
• Weakest: In a strong, one-sided trend.