Early Afternoon Breakout (1:00-2:00)

Entry Logic

• Entry trigger: Breakout from the lunch hour range.
• Confirmation: Increased volume on the breakout.
• Timeframe: 15-minute chart.
• Location context: Trade in the direction of the breakout.
• Market condition: A transition from a quiet lunch hour to a more active afternoon session.

Exit Logic

• Profit target: Measured move of the lunch hour range.
• Scaling out: Scale out 50% at 1R.
• Trailing stop: Trail the remaining position with the 20 EMA on the 5-minute chart.
• Signal failure exit: Exit if the breakout fails and the price returns to the range.
• Opposite signal exit: Exit on a confirmed reversal.
• Time expiration: Exit all trades by 3:00 PM EST.
• Momentum loss: Exit if the trend stalls after the breakout.

Stop Loss Structure

• Hard stop: Below the midpoint of the lunch hour range for longs, above for shorts.
• Soft stop: Not used.
• Max dollar loss: $120 per trade.
• Max percent loss: 0.6% of account.
• Structural stop: Below the low of the lunch hour range for longs, above the high for shorts.

Risk Management Framework

• Risk per trade: 0.6% of account.
• Daily limit: 2 losing trades.
• Weekly limit: 4% drawdown.
• Max drawdown: 12%.
• R:R requirement: Minimum 2:1.

Position Sizing Model

• Sizing approach: Risk-based.
• Volatility adjustment: Adjust size based on the width of the lunch hour range.
• Conviction sizing: Not applicable.
• Scaling in/out: No scaling in.

Trade Filtering

• Market conditions: Avoid days with no clear morning direction.
• Setups: Only trade breakouts from well-defined ranges.
• Instruments: Stocks that were in play in the morning.
• Time restrictions: Entry between 1:00 PM and 2:00 PM EST.
• Chop/news avoidance: Be aware of any scheduled afternoon news.

Context Framework

• Trend direction: Trade with the emerging afternoon trend.
• VWAP relationship: Enter long above VWAP, short below VWAP.
• Moving average relationship: Price breaking out above/below the 50 EMA.
• Range location: Trade the breakout of the lunch hour range.
• Higher TF alignment: The 60-minute chart should support the breakout direction.

Trade Management Rules

• Breakeven: Move stop to breakeven after 1R of profit.
• Scale out: At 1R and 2R.
• Add size: Not applicable.
• Fast vs slow moves: Be prepared for a quick move after the breakout.

Time Rules

• Optimal trading window: 1:00-2:00 PM EST.
• Times to avoid: Before 1:00 PM and after 2:00 PM EST.
• Session notes: This strategy captures the start of the afternoon session momentum.

Setup Classification

• A+ criteria: A clean breakout from a tight range with strong volume.
• A criteria: A breakout from a wider range with good volume.
• B criteria: A breakout with average volume.
• C criteria: A breakout with low volume (avoid).

Market Selection Criteria

• Instruments: High-beta stocks and ETFs.
• Volume: Look for a surge in volume at the time of the breakout.
• Volatility: Increased volatility is expected.

Statistical Edge Metrics

• Win rate: 45%.
• Avg win: 2.5R.
• Avg loss: 1R.
• Profit factor: 1.125.
• Expectancy: 0.125R per trade.

Failure Conditions

• Fails if the breakout is false and the market returns to a choppy state.
• Avoid on days with no clear catalyst.

Psychological Rules

• Requires the ability to switch from a patient to an aggressive mindset.
• Must be able to act quickly when the breakout occurs.

Advanced Components

• Regime detection: Use a volume-based indicator to confirm the breakout.
• Filters: Filter trades based on the quality of the lunch hour range.
• Correlation: Be aware of the overall market direction.
• MTF alignment: The 60-minute and daily charts should be aligned with the breakout direction.

Location

• Strongest: After a quiet lunch hour on a day with a strong morning trend.
• Weakest: On a choppy, directionless day.