FOMO Trap Identification

Entry Logic

• Entry trigger: Short a breakout that occurs on low volume.
• Confirmation: The breakout fails and the price returns to the previous range.
• Timeframe: 5-minute chart.
• Location: At a well-defined resistance level.
• Market condition: A stock that has been in the news.

Exit Logic

• Profit target: The bottom of the previous range.
• Scaling out: Not recommended.
• Trailing stop: Not recommended.
• Signal failure: Exit if the price breaks out again on high volume.
• Opposite signal: Not applicable.
• Time expiration: Exit if the trade is not profitable within 30 minutes.
• Momentum loss: Not applicable.

Stop Loss Structure

• Hard stop: Above the high of the failed breakout.
• Soft stop: None.
• Max dollar loss: $200 per trade.
• Max percent loss: 0.5% of account.
• Structural stop: Above the breakout level.

Risk Management Framework

• Risk per trade: 0.25% of account.
• Daily limit: 5 losing trades.
• Weekly limit: 4% drawdown.
• Max drawdown: 10%.
• R:R requirement: Minimum 2:1.

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: Avoid strong trending markets.
• Setups: Look for stocks that are being hyped on social media.
• Instruments: Small-cap and mid-cap stocks.
• Time restrictions: Most common in the first hour of trading.
• Chop/news avoidance: This strategy thrives on news-driven hype.

Context Framework

• Trend direction: Ranging or weak trend.
• VWAP relationship: The breakout occurs far above VWAP.
• MA relationship: The breakout occurs far from the 20 EMA.
• Range location: At the top of a recent range.
• Higher TF alignment: Higher timeframe charts show a resistance level.

Trade Management Rules

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

Time Rules

• Optimal window: First hour of the trading day.
• Times to avoid: Mid-day and end of day.
• Session notes: Look for stocks gapping up on news.

Setup Classification

• A+ setup: Low volume breakout, immediate failure, high social media hype.
• A setup: Low volume breakout, failure.
• B setup: High volume breakout that fails.
• C setup: Avoid.

Market Selection Criteria

• Instruments: Stocks with a high short interest.
• Volume: High relative volume.
• Volatility: High.

Statistical Edge Metrics

• Win rate: 50-60%.
• Avg win: 2R.
• Avg loss: 1R.
• Profit factor: 1.0 - 1.2.
• Expectancy: Positive.

Failure Conditions

• Strategy fails when the low-volume breakout is the start of a new trend.
• Avoid shorting stocks with a history of strong momentum.

Psychological Rules

• Must be able to short stocks that everyone is excited about.
• Requires quick execution.

Advanced Components

• Regime detection: Use a social media sentiment scanner.
• Filters: Filter for stocks with high short interest.
• Correlation: Not applicable.
• MTF alignment: Not applicable.

Location

• Strongest: At a multi-day resistance level.
• Weakest: In a strong uptrend.