Price Rejection at 50 EMA

Entry Logic

• Entry trigger: Price attempts to break the 50 EMA but is rejected.
• Confirmation: A strong rejection candle (e.g., pin bar, engulfing candle) forms at the 50 EMA.
• Timeframe: 30-minute chart.
• Location context: The 50 EMA is acting as a strong support or resistance level.
• Market condition: A trending or range-bound market where the 50 EMA is being respected.

Exit Logic

• Profit target: 2R or the next significant support/resistance level.
• Scaling out: Not recommended.
• Trailing stop: Trail the stop on the other side of the 50 EMA.
• Signal failure: Exit if the price closes on the wrong side of the 50 EMA.
• Opposite signal: Exit on a confirmed break of the 50 EMA.
• Time expiration: None.
• Momentum loss: Exit if momentum fades after the rejection.

Stop Loss Structure

• Hard stop: Just beyond the rejection candle.
• Soft stop: A close on the wrong side of the 50 EMA.
• Max dollar loss: $150 per trade.
• Max percent loss: 1.5% of account.
• Structural stop: Beyond the rejection candle.

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 1.5:1.

Position Sizing Model

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

Trade Filtering

• Market conditions: Avoid markets where the 50 EMA is not being respected.
• Setups: Only take clear rejections at the 50 EMA.
• Instruments: Any liquid instrument.
• Time restrictions: None.
• Chop/news avoidance: Avoid trading around major news.

Context Framework

• Trend direction: The rejection should be in the direction of the longer-term trend.
• VWAP relationship: The rejection should be in the direction of VWAP.
• MA relationship: The 50 EMA is a key level.
• Range location: The trade is taken at a key support or resistance level.
• Higher TF alignment: The higher timeframe chart should confirm the importance of the 50 EMA.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 1R move.
• Scale out: Not recommended.
• Add size: Not recommended.
• Fast vs slow moves: Let the trade run if the rejection leads to a strong move.

Time Rules

• Optimal window: Any time the 50 EMA is being respected.
• Times to avoid: When the 50 EMA is not a factor.
• Session notes: Works well in all sessions.

Setup Classification

• A+ setup: A strong rejection with a perfect confirmation candle.
• A setup: A decent rejection with a good confirmation candle.
• B setup: A weak rejection.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Any liquid instrument.
• Volume: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Win rate: 60%.
• Avg win: 1.5R.
• Avg loss: 1R.
• Profit factor: 1.4.
• Expectancy: 0.4R.

Failure Conditions

• The strategy fails when the 50 EMA is broken.
• Avoid taking trades if the rejection is not clear.

Psychological Rules

• Be patient and wait for the rejection.
• Trust the 50 EMA as a key level.

Advanced Components

• Regime detection: Use a longer-term moving average to confirm the trend.
• Filters: Only take trades in the direction of the longer-term trend.
• Correlation: Be aware of market correlations.
• MTF alignment: Check the higher timeframe chart for confirmation.

Location

• Strongest: When the 50 EMA is a clear and respected level.
• Weakest: When the 50 EMA is being ignored.