Penny Stock Momentum Scalp

Entry Logic

• Exact Entry Trigger: A sub-$1.00 stock breaks out of a 1-minute opening range on volume at least 500% of its average.
• Confirmation: The stock is on a major % gainer list and has a recent news catalyst.
• Timeframe: 1-minute chart.
• Location Context: Breaking the high of the day.
• Market Condition: High-risk, speculative market environment.

Exit Logic

• Profit Target(s): 5-10% scalp.
• Scaling Out: Exit the entire position at the target.
• Trailing Stop: A mental stop one tick below the prior 1-minute candle's low.
• Signal Failure: The breakout fails, and the stock immediately drops back into the range.
• Opposite Signal: A large seller appears on the Level 2, creating a "wall" of resistance.
• Time Expiration: 2-5 minutes. This is a pure scalp.
• Momentum Loss: Volume starts to decrease, and the price stalls.

Stop Loss Structure

• Hard Stop: 4% below entry. Must be respected without fail.
• Soft Stop: The breakout level fails to hold.
• Maximum Dollar Loss: $100 per trade.
• Maximum Percent Loss: 4% of the trade value.
• Structural Stop: The low of the breakout candle.

Risk Management Framework

• Risk Per Trade: 0.1% of the account. Risk is managed via extremely small position size.
• Maximum Daily Loss: 0.5% of the account.
• Maximum Weekly Loss: 2% of the account.
• Maximum Drawdown: 10% of the account.
• R:R Requirement: Minimum 2:1.

Position Sizing Model

• Sizing Approach: Fixed, small dollar amount (e.g., $500-$1000 per trade).
• Volatility Adjustment: The entire strategy is based on extreme volatility.
• Conviction Sizing: Not applicable.
• Scaling In: Never.
• Scaling Out: Exit all at once.

Trade Filtering

• Market Conditions to Avoid: Slow, risk-off markets.
• Specific Setups: Must have a news catalyst and be on a top gainer list.
• Instrument Requirements: Sub-$1.00 stocks listed on major exchanges (not OTC).
• Time Restrictions: First hour of the trading day.
• Chop/News Avoidance: Avoid stocks with no clear reason for the move.

Context Framework

• Trend Direction: Strong intraday uptrend.
• VWAP Relationship: Far above VWAP.
• MA Relationship: Far above all moving averages.
• Range Location: At the high of the day.
• Higher TF Alignment: Not relevant.

Trade Management Rules

• Breakeven: Not applicable for such a short-term scalp.
• Scale Out: Not applicable.
• Add Size: Never.
• Fast vs Slow Moves: Only trade fast moves.

Time Rules

• Optimal Window: 9:30 AM - 10:30 AM EST.
• Times to Avoid: After the morning momentum session.
• Session Notes: This is a pure morning momentum play.

Setup Classification

• A+ Criteria: Sub-$1 stock with a major catalyst, >1000% volume spike, breaking the HOD.
• A Criteria: A sub-$1 stock with high volume breaking out.
• B Criteria: A stock between $1 and $2 with a similar setup.
• C Criteria: Any stock over $2, or any stock with no catalyst.

Market Selection Criteria

• Instruments: Common stocks priced under $1.00.
• Volume/Liquidity: Can be thin, but must have a surge of volume to be tradable.
• Volatility: Extreme.

Statistical Edge Metrics

• Expected Win Rate: 40-50%.
• Average Win Size: 8-12%.
• Average Loss Size: 4-5%.
• Profit Factor: 2.0+.
• Expectancy: Positive due to disciplined risk management.

Failure Conditions

• Market Conditions: The initial momentum was a head fake or a liquidity grab.
• Specific Scenarios: A large, hidden seller absorbs all the buying pressure.

Psychological Rules

• Mental Discipline: Requires extreme discipline in risk management and the ability to take many small losses. Do not get attached to any position.

Advanced Components

• Market Regime Detection: A strong 'risk-on' tape helps.
• Filters: A real-time scanner for sub-$1 stocks hitting new highs on high volume is essential.
• Correlation: Not a factor.
• MTF Alignment: Not applicable.

Location

• Where Strongest: In speculative bull markets.
• Where Weakest: In bear markets or periods of low retail participation.