Futures Settlement Price Trade

Entry Logic

• Exact Entry Trigger: Enter long if the market opens above the previous day's settlement price. Enter short if the market opens below the previous day's settlement price.
• Confirmation: The opening should be on high volume.
• Timeframe: 5-minute chart.
• Location Context: Not applicable.
• Market Condition: A market that is showing a clear bias at the open.

Exit Logic

• Profit Targets: The previous day's high for longs, or the previous day's low for shorts.
• Scaling Out: Not recommended.
• Trailing Stop: Trail the stop loss below the opening price for longs, or above the opening price for shorts.
• Signal Failure Exit: Exit if the market closes back below the settlement price for longs, or above for shorts.
• Opposite Signal Exit: Not applicable.
• Time Expiration: Exit the trade by the end of the day.
• Momentum Loss: Exit if momentum starts to wane.

Stop Loss Structure

• Hard Stop: Place the stop loss 10 ticks below the opening price for longs, or 10 ticks above for shorts.
• Soft Stop: Not used.
• Max Dollar Loss: Varies by contract.
• Max Percent Loss: 1% of account capital.
• Structural Stop: The stop is placed behind the opening price.

Risk Management Framework

• Risk Per Trade: 0.5% of account capital.
• Maximum Daily Loss Limit: 2% of account capital.
• Maximum Weekly Loss Limit: 5% of account capital.
• Maximum Drawdown: 10% from peak equity.
• R:R Requirement: Minimum 1.5:1 risk-reward ratio.

Position Sizing Model

• Sizing Approach: Fixed fractional sizing.
• Volatility Adjustment: Not applicable.
• Conviction Sizing: Not applicable.
• Scaling In: Not recommended.
• Scaling Out: Not recommended.

Trade Filtering

• Market Conditions to Avoid: A market that opens near the previous day's settlement price.
• Specific Setups Required: A clear gap up or down from the previous day's settlement price.
• Instruments: Any futures contract.
• Time Restrictions: Trade only at the open.
• Chop/News Avoidance: Avoid trading during major news events.

Context Framework

• Trend Direction: Trade in the direction of the opening gap.
• VWAP Relationship: For longs, the price should be above VWAP. For shorts, the price should be below VWAP.
• MA Relationship: Not applicable.
• Range Location: Not applicable.
• Higher TF Alignment: Not applicable.

Trade Management Rules

• Breakeven: Move stop to breakeven after the first profit target is hit.
• Scale Out: Not applicable.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a fast-moving strategy. Be prepared for immediate fills and exits.

Time Rules

• Optimal Trading Window: The first 30 minutes of the regular trading session.
• Times to Avoid: The rest of the day.
• Session Notes: This strategy is most effective when there is a clear institutional bias at the open.

Setup Classification

• A+ Setup: A large gap up or down from the settlement price on high volume.
• A Setup: A decent gap with good volume.
• B Setup: A small gap or low volume.
• C Setup: Avoid. The market opens near the settlement price.

Market Selection Criteria

• Instruments: Any futures contract.
• Volume/Liquidity: High volume and liquidity are essential.
• Volatility: High volatility is preferred.

Statistical Edge Metrics

• Win Rate: 50-55%.
• Avg Win: 2.5R.
• Avg Loss: 1R.
• Profit Factor: 1.25.
• Expectancy: 0.25R per trade.

Failure Conditions

• When Strategy Fails: When the opening gap is a fakeout and the market reverses.
• Specific Scenarios to Avoid: Trading this strategy when the opening gap is small.

Psychological Rules

• Mental Discipline: Be decisive and act quickly at the open. Do not hesitate.

Advanced Components

• Regime Detection: Not applicable.
• Filters: Use a volume filter to confirm the strength of the opening move.
• Correlation: Not applicable.
• MTF Alignment: Not applicable.

Location

• Where Strongest: At the open of the regular trading session.
• Where Weakest: At any other time.