Congressional Trading Signal

Entry Logic

• Exact Entry Trigger: A member of Congress, particularly one on a key committee, discloses a significant trade in a specific stock or industry.
• Confirmation: The trade aligns with recent legislation or government contracts.
• Timeframe: Daily chart.
• Location Context: Any, the edge is informational, not technical.
• Market Condition: Any.

Exit Logic

• Profit Target(s): 20% or until news emerges that explains the trade.
• Scaling Out: Sell half at 15%, let the rest ride.
• Trailing Stop: A manual review of the position weekly.
• Signal Failure: The stock fails to move or drifts lower.
• Opposite Signal: The same member of Congress discloses a sale of the position.
• Time Expiration: 3-6 months.
• Momentum Loss: The informational edge seems to have dissipated.

Stop Loss Structure

• Hard Stop: 12% below entry.
• Soft Stop: If the thesis behind the trade appears to be incorrect.
• Maximum Dollar Loss: $1200 per trade.
• Maximum Percent Loss: 12% of the trade value.
• Structural Stop: Below a recent support level.

Risk Management Framework

• Risk Per Trade: 0.8% of the account.
• Maximum Daily Loss: Not applicable.
• Maximum Weekly Loss: Not applicable.
• Maximum Drawdown: 16% of the account.
• R:R Requirement: Minimum 1.5:1.

Position Sizing Model

• Sizing Approach: Fixed dollar amount.
• Volatility Adjustment: Standard sizing.
• Conviction Sizing: Larger size for trades by members on influential committees (e.g., Armed Services, Finance).
• Scaling In: Not recommended.
• Scaling Out: As per exit logic.

Trade Filtering

• Market Conditions to Avoid: Extreme market panic.
• Specific Setups: Focus on trades in industries directly overseen by the Congress member's committee.
• Instrument Requirements: Liquid stocks, avoid options unless highly experienced.
• Time Restrictions: Enter as soon as the disclosure is made public.
• Chop/News Avoidance: The trade itself is the news.

Context Framework

• Trend Direction: Not the primary factor.
• VWAP Relationship: Not the primary factor.
• MA Relationship: Not the primary factor.
• Range Location: Not the primary factor.
• Higher TF Alignment: Not required.

Trade Management Rules

• Breakeven: Move stop to breakeven after a 10% gain.
• Scale Out: At predefined targets.
• Add Size: Not recommended.
• Fast vs Slow Moves: This is a slow-burn strategy.

Time Rules

• Optimal Window: Immediately following the public disclosure.
• Times to Avoid: After the stock has already made a very large move.
• Session Notes: Not session-dependent.

Setup Classification

• A+ Criteria: A senior committee member makes a large trade in a non-obvious company within their committee's jurisdiction.
• A Criteria: A significant trade that aligns with recent news or legislation.
• B Criteria: A smaller trade or a trade in a broad ETF.
• C Criteria: Trades by members not on relevant committees.

Market Selection Criteria

• Instruments: Common stocks, occasionally ETFs.
• Volume/Liquidity: Must be liquid enough to enter and exit without significant slippage.
• Volatility: Any.

Statistical Edge Metrics

• Expected Win Rate: 60-70%.
• Average Win Size: 20-30%.
• Average Loss Size: 10-12%.
• Profit Factor: 2.0+.
• Expectancy: Positive.

Failure Conditions

• Market Conditions: A market crash can impact all stocks.
• Specific Scenarios: The politician's trade was not based on non-public information, or the information was wrong.

Psychological Rules

• Mental Discipline: This strategy requires a degree of cynicism and the ability to act on imperfect information.

Advanced Components

• Market Regime Detection: Not critical.
• Filters: Use services that track and analyze congressional trades.
• Correlation: Be aware of industry-wide bets.
• MTF Alignment: Not applicable.

Location

• Where Strongest: In industries with heavy government regulation or involvement (defense, healthcare, energy).
• Where Weakest: In industries with little government interaction (e.g., consumer discretionary).