Moving Average Volatility Expansion

Entry Logic

• Entry trigger: A moving average (e.g., 20-period SMA) is flat, and then price breaks out of a tight range, causing the moving average to slope up or down.
• Confirmation: The moving average starts to expand away from a longer-term moving average (e.g., 50-period SMA).
• Timeframe: 1-hour chart.
• Location context: The expansion happens after a period of low volatility.
• Market condition: A new trend is starting after a period of consolidation.

Exit Logic

• Profit target: 3R or when the moving averages start to contract.
• Scaling out: Not recommended.
• Trailing stop: Trail the stop on the other side of the 20-period SMA.
• Signal failure: Exit if the moving averages start to contract.
• Opposite signal: Exit on a reversal signal.
• Time expiration: None.
• Momentum loss: Exit if the moving averages flatten out.

Stop Loss Structure

• Hard stop: On the other side of the consolidation range.
• Soft stop: A close back inside the consolidation range.
• Max dollar loss: $200 per trade.
• Max percent loss: 2% of account.
• Structural stop: On the other side of the consolidation range.

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: None.
• Conviction sizing: None.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions: Avoid taking trades in a high-volatility environment.
• Setups: Only take trades after a period of low volatility.
• Instruments: Any liquid instrument.
• Time restrictions: None.
• Chop/news avoidance: Avoid trading around major news.

Context Framework

• Trend direction: A new trend is starting.
• VWAP relationship: The breakout should be in the direction of VWAP.
• MA relationship: The moving averages are expanding.
• Range location: The trade is taken on a breakout of a consolidation range.
• Higher TF alignment: The higher timeframe chart should confirm the new 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: Let the trade run after a successful breakout.

Time Rules

• Optimal window: Any time a new trend is starting.
• Times to avoid: High-volatility periods.
• Session notes: Works well in all sessions.

Setup Classification

• A+ setup: A breakout from a period of very low volatility.
• A setup: A breakout from a period of moderate volatility.
• B setup: A breakout in a high-volatility environment.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Any liquid instrument.
• Volume: High on the breakout.
• Volatility: Low during consolidation, high on the breakout.

Statistical Edge Metrics

• Win rate: 45%.
• Avg win: 3R.
• Avg loss: 1R.
• Profit factor: 1.35.
• Expectancy: 0.35R.

Failure Conditions

• The strategy fails when the breakout is false.
• Avoid taking trades if the market is already volatile.

Psychological Rules

• Be patient and wait for the period of low volatility.
• Do not get faked out by false breakouts.

Advanced Components

• Regime detection: Use the Bollinger Bandwidth to identify low volatility.
• Filters: Only take trades when the Bollinger Bandwidth is at a historical low.
• Correlation: Be aware of market correlations.
• MTF alignment: Check the higher timeframe chart for confirmation.

Location

• Strongest: After a period of low volatility.
• Weakest: In a high-volatility environment.