4. Moving Average Distance Oscillator Trade

Entry Logic

Price deviates from 50 EMA by 2 ATR. Oscillator (e.g., Keltner Channel distance from 50 EMA) shows extreme reading. Confirmation is a reversal candle back towards 50 EMA. Timeframe is 10-minute. Location context is an overextended move. Market condition is mean reversion.

Exit Logic

Profit target is the 50 EMA. Scale out 50% at 0.75R. Trail stop at prior candle high/low. Signal failure if price continues away from 50 EMA. Time expiration at 60 minutes if no movement. Momentum loss if price stalls near entry.

Stop Loss Structure

Hard stop is 0.75 ATR beyond entry candle. Soft stop is a close further away from 50 EMA. Max dollar loss is $120 per trade. Max percent loss is 0.2% of capital. Structural stop is beyond the extreme high/low of the move.

Risk Management Framework

Risk 0.4% per trade. Daily limit is 1.8% loss. Weekly limit is 4.5% loss. Max drawdown is 9%. R:R requirement is 1:1 minimum.

Position Sizing Model

Size to risk 0.4% of capital. Adjust for volatility using 20-period ATR. Conviction sizing increases size by 25% for A+ setups. Scale in 25% on strong reversal confirmation.

Trade Filtering

Only trade stocks showing clear overextensions. Avoid consolidations. Avoid earnings reports. Trade only liquid stocks.

Context Framework

Higher timeframe (60-minute) shows overextension. Price must be far from VWAP. 50 EMA must be relatively flat or gently trending. Entry must be at an extreme of the daily range.

Trade Management Rules

Move to breakeven at 0.5R. Scale out 50% at 1R. Do not add size. Manage fast moves with tight targets. Manage slow moves by exiting.

Time Rules

Optimal window 10:00 AM - 12:00 PM EST. Avoid market open. Avoid market close.

Setup Classification

A+: Extreme deviation, high volume reversal, clear target. A: Good deviation, good volume reversal, clear target. B: Moderate deviation, moderate volume, less clear target. C: Avoid.

Market Selection Criteria

Instruments: S&P 500 components. Volume must be > 3 million shares. Volatility must be > 1% daily range.

Statistical Edge Metrics

Win rate 52%. Avg win 1R. Avg loss 0.8R. Profit factor 1.15. Expectancy 0.08R.

Failure Conditions

Strategy fails during strong trend accelerations. Strategy fails during news-driven moves. Strategy fails on false reversals.

Psychological Rules

Be patient for extremes. Do not anticipate. Follow the plan. Control fear.

Advanced Components

Regime detection uses Average True Range (ATR) to measure volatility. Filter for 60-minute Keltner Channel extremes. Correlation check with market index.

Location

Strongest during mid-day. Weakest at market open.