Herd Mentality Fade

Entry Logic

• Entry trigger: Fade a strong move that is not supported by volume.
• Confirmation: Divergence between price and a momentum oscillator (e.g., RSI).
• Timeframe: 15-minute chart.
• Location: Near a key support or resistance level.
• Market condition: Ranging market.

Exit Logic

• Profit target: The other side of the range.
• Scaling out: Not recommended.
• Trailing stop: Not recommended.
• Signal failure: Exit if the price breaks the support or resistance level.
• Opposite signal: Exit on a confirmed breakout in the direction of the herd.
• Time expiration: Exit if the trade is not profitable within 2 hours.
• Momentum loss: Not applicable.

Stop Loss Structure

• Hard stop: 1 ATR beyond the support or resistance level.
• Soft stop: None.
• Max dollar loss: $300 per trade.
• Max percent loss: 0.75% of account.
• Structural stop: Beyond the swing high or low.

Risk Management Framework

• Risk per trade: 0.5% of account.
• Daily limit: 4 losing trades.
• Weekly limit: 6% drawdown.
• Max drawdown: 12%.
• R:R requirement: Minimum 1.5:1.

Position Sizing Model

• Sizing approach: Fixed dollar amount.
• Volatility adjustment: None.
• Conviction sizing: All setups are treated equally.
• Scaling in: Not recommended.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions: Only trade in ranging markets.
• Setups: Look for clear support and resistance levels.
• Instruments: ETFs and large-cap stocks.
• Time restrictions: Avoid the first and last hour of trading.
• Chop/news avoidance: Avoid trading around news releases.

Context Framework

• Trend direction: Ranging.
• VWAP relationship: Price oscillates around VWAP.
• MA relationship: Moving averages are flat and intertwined.
• Range location: Trade at the boundaries of the range.
• Higher TF alignment: Higher timeframe charts also show a ranging market.

Trade Management Rules

• Breakeven: Not recommended.
• Scale out: Not recommended.
• Add size: Not recommended.
• Fast vs slow moves: Expect a slow grind.

Time Rules

• Optimal window: Mid-day trading session.
• Times to avoid: Open and close.
• Session notes: Works well on quiet trading days.

Setup Classification

• A+ setup: Clear range, divergence, low volume move.
• A setup: Clear range, low volume move.
• B setup: Unclear range.
• C setup: Avoid.

Market Selection Criteria

• Instruments: SPY, QQQ, and other major index ETFs.
• Volume: High liquidity.
• Volatility: Low to moderate.

Statistical Edge Metrics

• Win rate: 60-70%.
• Avg win: 1.5R.
• Avg loss: 1R.
• Profit factor: 1.2 - 1.4.
• Expectancy: Positive.

Failure Conditions

• Strategy fails when the market breaks out of the range.
• Avoid during trending markets.

Psychological Rules

• Requires patience to wait for the setup.
• Must be able to accept small winners.

Advanced Components

• Regime detection: Use a trend filter to identify ranging markets.
• Filters: None.
• Correlation: Be aware of market correlations.
• MTF alignment: Higher timeframe charts should confirm the range.

Location

• Strongest: In well-defined, multi-day ranges.
• Weakest: In trending markets.