Intermarket Analysis Day Trade

Entry Logic

• Long entry: Bonds (ZB) are selling off, and the Dollar (UUP) is weak. Go long equities (SPY).
• Short entry: Bonds are rallying, and the Dollar is strong. Go short equities.
• Confirmation: A clear trend in the related markets.
• Timeframe: 15-minute chart.
• Location: Any.
• Market Condition: Risk-on or risk-off environment.

Exit Logic

• Profit Target: 2.5R.
• Scaling Out: Scale out at 1.5R.
• Trailing Stop: Trail the 20-period EMA.
• Signal Failure: If the related markets reverse.
• Opposite Signal: Not applicable.
• Time Expiration: End of day.
• Momentum Loss: If the trend stalls.

Stop Loss Structure

• Hard Stop: 1.5% below entry.
• Soft Stop: If the intermarket relationship breaks.
• Max Dollar Loss: $200.
• Max Percent Loss: 1% of account.
• Structural Stop: Below a recent swing low.

Risk Management Framework

• Risk Per Trade: 1% of account.
• Daily Limit: 2 losing trades.
• Weekly Limit: 4% drawdown.
• Max Drawdown: 8%.
• R:R Requirement: 2:1.

Position Sizing Model

• Sizing Approach: Fixed fractional.
• Volatility Adjustment: Not primary.
• Conviction Sizing: Not recommended.
• Scaling In: Not recommended.
• Scaling Out: At 1.5R.

Trade Filtering

• Market Conditions: Clear trend in related markets.
• Setups: The intermarket picture must be clear.
• Instruments: SPY, ZB, UUP.
• Time Restrictions: Any.
• Chop/News Avoidance: Avoid major news.

Context Framework

• Trend Direction: Determined by the related markets.
• VWAP Relationship: Not primary.
• MA Relationship: Not primary.
• Range Location: Not applicable.
• Higher TF Alignment: Daily chart should confirm the risk-on/off mood.

Trade Management Rules

• Breakeven: At 1.5R.
• Scale Out: At 1.5R.
• Add Size: Not recommended.
• Fast vs Slow Moves: Let it run.

Time Rules

• Optimal Window: Any.
• Times to Avoid: Illiquid hours.
• Session Notes: A macro-based day trade.

Setup Classification

• A+ Setup: Bonds, Dollar, and equities all in perfect alignment.
• A Setup: Good alignment.
• B Setup: Mixed signals.
• C Setup: No clear relationship.

Market Selection Criteria

• Instruments: Broad market ETFs and futures.
• Volume: High.
• Volatility: Moderate.

Statistical Edge Metrics

• Win Rate: 60%.
• Avg Win: 2.5R.
• Avg Loss: 1R.
• Profit Factor: 2.1.
• Expectancy: 0.7R per trade.

Failure Conditions

• Market Conditions: When correlations break down.
• Specific Scenarios: A flight to safety into both bonds and the dollar.

Psychological Rules

• Mental Discipline: Requires a macro perspective.

Advanced Components

• Regime Detection: The strategy itself is a regime detector.
• Filters: Not needed.
• Correlation: The basis of the strategy.
• MTF Alignment: Daily chart context is helpful.

Location

• Strongest: In clear risk-on or risk-off environments.
• Weakest: In mixed, uncertain markets.