Daily Pivot Point Breakout

Entry Logic

• Enter long on a close above the daily pivot point (DP) with increased volume.
• Enter short on a close below the DP with increased volume.
• Confirmation requires the breakout candle to be a strong, decisive candle (e.g., a marubozu).
• Timeframe is 15-minute chart.
• Location is at the daily pivot point.
• Market must be showing signs of momentum in the direction of the breakout.

Exit Logic

• Profit target is the next support/resistance level (S1/R1).
• Scale out 50% of the position at the halfway point to S1/R1.
• Trail the remaining position with a 20-period exponential moving average (EMA).
• Exit if the price closes back below the daily pivot point for a long, or above for a short.
• Exit on a confirmed opposing signal.
• Exit the trade if it does not reach the first profit target within 90 minutes.
• Exit if momentum indicators show a strong divergence against the trade.

Stop Loss Structure

• Hard stop is placed 15 ticks below the entry candle for a long, or 15 ticks above for a short.
• Soft stop is a close back across the daily pivot point.
• Maximum dollar loss is $150 per trade.
• Maximum percent loss is 1.5% of the account.
• Structural stop is placed below the low of the breakout candle for a long, or above the high for a short.

Risk Management Framework

• Risk 1% of account equity per trade.
• Maximum daily loss is 3% of account equity.
• Maximum weekly loss is 6% of account equity.
• Maximum drawdown is 20% of account equity.
• Minimum risk-reward ratio is 1:1.5.

Position Sizing Model

• Use a volatility-based position sizing model.
• Adjust position size based on the Average True Range (ATR).
• Increase position size by 20% for A+ setups.
• Do not scale in.
• Scale out 50% at the first profit target.

Trade Filtering

• Avoid trading during low-volume periods.
• Only trade breakouts with clear volume confirmation.
• Trade highly liquid instruments like major currency pairs or index futures.
• Avoid trading in the first 15 minutes of the market open.
• Avoid trading in choppy, range-bound markets.

Context Framework

• The trade should be in the direction of the prevailing trend.
• Price should be breaking away from the VWAP.
• Price should be breaking away from the 50-period simple moving average (SMA).
• The trade is taken at the daily pivot point.
• The higher timeframe chart (240-minute) should confirm the trend direction.

Trade Management Rules

• Move stop to breakeven after the price has moved in your favor by the amount of your initial risk.
• Scale out at the first profit target.
• Do not add to the position.
• In a fast-moving market, consider taking full profits at the first target.

Time Rules

• Optimal trading window is during the first two hours of the London and New York sessions.
• Avoid trading during the Asian session.
• The strategy is most effective on days with scheduled economic news releases.

Setup Classification

• A+ setup: Breakout with very high volume and a strong trend.
• A setup: Breakout with high volume and a moderate trend.
• B setup: Breakout with average volume and a weak trend.
• C setup: Breakout with low volume or no clear trend.

Market Selection Criteria

• Trade major currency pairs (EUR/USD, GBP/USD, USD/JPY).
• Minimum daily volume of $50 billion.
• Average daily range of at least 80 pips.

Statistical Edge Metrics

• Expected win rate is 50%.
• Average win is 60 pips.
• Average loss is 30 pips.
• Profit factor is 1.67.
• Expectancy per trade is 15 pips.

Failure Conditions

• The strategy fails in ranging markets.
• False breakouts are the most common failure scenario.

Psychological Rules

• Avoid chasing breakouts.
• Be prepared for the emotional swings of breakout trading.

Advanced Components

• Use a trend-following indicator like the ADX to confirm the trend.
• Use a volume-profile tool to identify areas of high and low liquidity.
• Avoid trading correlated pairs in the same direction.
• The weekly chart must confirm the overall trend direction.

Location

• The setup is strongest when the breakout occurs after a period of consolidation.
• The setup is weakest when the market is already overextended.
• The location of the breakout relative to other support and resistance levels is a key factor.