Forex Central Bank Decision Trade

Entry Logic

• Entry triggers on a breakout of the 15-minute range following a central bank interest rate decision.
• Confirmation requires a follow-up candle in the same direction.
• Timeframe is the 15-minute chart.
• Location is a breakout from a consolidation range.
• Market condition is high uncertainty leading up to the decision, followed by high volatility.

Exit Logic

• Profit target is 100 pips.
• Scale out 50% of the position at 50 pips.
• Trailing stop is a 50-pip trailing stop.
• Exit on signal failure if the price closes back inside the pre-decision range.
• Exit on an opposite signal from a strong reversal candle.
• Exit on time expiration after 4 hours.
• Exit on momentum loss if the price stalls for more than an hour.

Stop Loss Structure

• Hard stop is placed at the midpoint of the pre-decision range.
• No soft stop is used.
• Maximum dollar loss is 2.5% of account equity.
• Maximum percent loss is 2.5% of account equity.
• Structural stop is placed on the opposite side of the pre-decision range.

Risk Management Framework

• Risk per trade is 1.25% of the account.
• Maximum daily loss limit is 2.5% of the account.
• Maximum weekly loss limit is 6% of the account.
• Maximum drawdown allowed is 20%.
• Risk-reward ratio requirement is a minimum of 1:2.

Position Sizing Model

• Sizing is based on a fixed fractional model (1.25% of account per trade).
• No volatility adjustment is used.
• Conviction sizing is not used.
• No scaling in.
• Scale out 50% at the first target.

Trade Filtering

• Only trade major central bank decisions (e.g., FOMC, ECB, BOE).
• Requires a clear consolidation range before the decision.
• Instrument is the currency of the central bank making the decision.
• Trade only in the hour following the decision.
• Avoid trading if the decision is in line with expectations and there is no market reaction.

Context Framework

• Trend direction is determined by the direction of the breakout.
• The focus is on the market's reaction to the new information.
• Moving averages are not used.
• Location is a breakout from a consolidation range.
• Higher timeframe (daily) should be considered for potential profit targets.

Trade Management Rules

• Be prepared for high volatility and potential slippage.
• Move stop to breakeven after the first profit target is hit.
• Scale out at the first profit target.
• Do not add to the position.

Time Rules

• Optimal trading window is the first hour after the central bank decision.
• Avoid trading in the hours leading up to the decision.
• Be aware of the exact time of the decision and any subsequent press conference.

Setup Classification

• A+ setup: Breakout of a clear range with high volume and a surprise decision.
• A setup: Breakout of a clear range with an expected decision but a hawkish/dovish statement.
• B setup: Breakout of a choppy range.
• C setup: No clear range before the decision.

Market Selection Criteria

• Instrument is the currency of the central bank making the decision.
• Requires extreme liquidity and volatility.
• Volatility is the key to this strategy.

Statistical Edge Metrics

• Expected win rate is 45%.
• Average win is 3R.
• Average loss is 1R.
• Profit factor is 2.35.
• Expectancy per trade is +0.8R.

Failure Conditions

• Strategy fails when the market fades the initial breakout (a buy the rumor, sell the news" scenario).
• Avoid trading if the market is illiquid.

Psychological Rules

• Stay calm and objective during extreme volatility.
• Have a clear plan and stick to it.

Advanced Components

• No advanced filters are used.
• The focus is on the market's reaction to a major fundamental event.
• No multi-timeframe alignment is needed.

Location

• Strongest when the central bank decision is a surprise.
• Weakest when the decision is widely expected.
• The element of surprise is a key factor.