Euphoria Top Detection

Entry Logic

• Entry trigger: Short a market that has gone parabolic and is showing signs of exhaustion.
• Confirmation: A bearish divergence on the weekly chart.
• Timeframe: Weekly chart for entry, monthly for context.
• Location: At an all-time high.
• Market condition: Extreme greed and euphoria.

Exit Logic

• Profit target: A 38.2% retracement of the entire bull market.
• Scaling out: Not recommended.
• Trailing stop: Use a 50-week moving average.
• Signal failure: Exit if the market makes a new all-time high.
• Opposite signal: Not applicable.
• Time expiration: This is a long-term position.
• Momentum loss: Not applicable.

Stop Loss Structure

• Hard stop: A 10% move against the position.
• Soft stop: None.
• Max dollar loss: 10% of account.
• Max percent loss: 10% of account.
• Structural stop: Above the all-time high.

Risk Management Framework

• Risk per trade: 5% of account.
• Daily limit: Not applicable.
• Weekly limit: Not applicable.
• Max drawdown: 30%.
• R:R requirement: Minimum 5:1.

Position Sizing Model

• Sizing approach: Fixed fractional.
• Volatility adjustment: None.
• Conviction sizing: All setups are treated equally.
• Scaling in: Scale in as the market moves against you.
• Scaling out: Not recommended.

Trade Filtering

• Market conditions: Only trade during periods of extreme euphoria.
• Setups: Look for a blow-off top.
• Instruments: Index futures.
• Time restrictions: Not applicable.
• Chop/news avoidance: Not applicable.

Context Framework

• Trend direction: Counter-trend.
• VWAP relationship: Not applicable.
• MA relationship: Price is extremely extended from the 200-week moving average.
• Range location: At an all-time high.
• Higher TF alignment: Monthly chart shows overbought conditions.

Trade Management Rules

• Breakeven: Not applicable.
• Scale out: Not applicable.
• Add size: Add to the position at pre-defined levels.
• Fast vs slow moves: Expect a sharp decline.

Time Rules

• Optimal window: Not applicable.
• Times to avoid: Not applicable.
• Session notes: This is a once-in-a-decade trade.

Setup Classification

• A+ setup: Parabolic move, bearish divergence, extreme sentiment.
• A setup: Parabolic move, extreme sentiment.
• B setup: Parabolic move.
• C setup: Avoid.

Market Selection Criteria

• Instruments: ES, NQ.
• Volume: High.
• Volatility: High.

Statistical Edge Metrics

• Win rate: 10-20%.
• Avg win: 10R.
• Avg loss: 1R.
• Profit factor: 1.0 - 2.0.
• Expectancy: Positive.

Failure Conditions

• Strategy fails if the bull market continues.
• This is a very high-risk strategy.

Psychological Rules

• Requires extreme patience and conviction.
• Must be able to withstand large paper losses.

Advanced Components

• Regime detection: Use sentiment indicators to identify euphoria.
• Filters: None.
• Correlation: Not applicable.
• MTF alignment: Look for confirmation on multiple timeframes.

Location

• Strongest: At the peak of a secular bull market.
• Weakest: During a normal bull market.