Low Float Runner Trade

Entry Logic

• Exact Entry Trigger: A stock with a float below 20 million shares breaks out of a multi-day consolidation on volume 5x its 20-day average.
• Confirmation: The stock has a recent news catalyst and is clearing a key daily resistance level.
• Timeframe: 5-minute chart for entry.
• Location Context: Breaking out above a prior day's high.
• Market Condition: Any, but bullish markets provide a tailwind.

Exit Logic

• Profit Target(s): 20-50% or more. These can run for multiple days.
• Scaling Out: Sell 1/3 at 20%, 1/3 at 40%, and trail the final third with the 20-period EMA on the 60-minute chart.
• Trailing Stop: The 20-period EMA on the 60-minute chart.
• Signal Failure: The breakout fails and closes back below the resistance level on the same day.
• Opposite Signal: A bearish engulfing candle on the daily chart.
• Time Expiration: 1-5 days.
• Momentum Loss: The stock fails to make a new high for a full trading session.

Stop Loss Structure

• Hard Stop: 10% below entry.
• Soft Stop: A close below the breakout level on the daily chart.
• Maximum Dollar Loss: $1000 per trade.
• Maximum Percent Loss: 10% of the trade value.
• Structural Stop: Below the low of the breakout day.

Risk Management Framework

• Risk Per Trade: 0.75% of the account.
• Maximum Daily Loss: 2% of the account.
• Maximum Weekly Loss: 5% of the account.
• Maximum Drawdown: 15% of the account.
• R:R Requirement: Minimum 3:1.

Position Sizing Model

• Sizing Approach: Use half-size positions due to the high volatility.
• Volatility Adjustment: Risk is managed via position size.
• Conviction Sizing: A+ setups (float <10M, strong catalyst) can use a 75% size.
• Scaling In: Can add on a successful retest of the breakout level on day 2.
• Scaling Out: As per exit logic.

Trade Filtering

• Market Conditions to Avoid: Severe bear markets.
• Specific Setups: Must have a low float (<20M shares) and a catalyst.
• Instrument Requirements: Small-cap stocks.
• Time Restrictions: The initial entry is best in the morning session.
• Chop/News Avoidance: Avoid stocks with a history of dilutive offerings.

Context Framework

• Trend Direction: The breakout initiates a new, strong uptrend.
• VWAP Relationship: Well above the intraday VWAP.
• MA Relationship: The breakout should reclaim all major moving averages.
• Range Location: Breaking out of a multi-week or multi-month range.
• Higher TF Alignment: The weekly chart should not be in a strong downtrend.

Trade Management Rules

• Breakeven: Move stop to entry after a 15% gain.
• Scale Out: Take profits into strength.
• Add Size: Cautiously on day 2 or 3 if momentum continues.
• Fast vs Slow Moves: Be prepared for extremely fast moves. These stocks can go parabolic.

Time Rules

• Optimal Window: The first two hours of the day for the initial breakout.
• Times to Avoid: Chasing the stock after it has already run 50%+.
• Session Notes: These can run all day and into the next day.

Setup Classification

• A+ Criteria: Float < 10M, major catalyst, high short interest, breaking out of a long-term base.
• A Criteria: Float < 20M, catalyst, and a technical breakout.
• B Criteria: Low float but no clear catalyst.
• C Criteria: Any stock with a float > 30M.

Market Selection Criteria

• Instruments: Small-cap common stocks.
• Volume/Liquidity: Average volume can be low, but the breakout day must have high volume.
• Volatility: Extreme.

Statistical Edge Metrics

• Expected Win Rate: 30-40%.
• Average Win Size: 50-100%+.
• Average Loss Size: 10-12%.
• Profit Factor: 4.0+.
• Expectancy: Extremely high due to the explosive potential.

Failure Conditions

• Market Conditions: A market-wide selloff can kill momentum.
• Specific Scenarios: The company uses the price spike to announce a dilutive secondary offering.

Psychological Rules

• Mental Discipline: Must have the conviction to hold a winner for large gains but also the discipline to cut it immediately if the breakout fails.

Advanced Components

• Market Regime Detection: A 'risk-on' environment is highly favorable.
• Filters: A scanner for low-float stocks making new highs on high volume is essential.
• Correlation: Not a factor.
• MTF Alignment: A weekly chart that is starting to turn up adds confidence.

Location

• Where Strongest: In speculative, momentum-driven markets.
• Where Weakest: In slow, value-driven markets.