Trading Rules 2.0

RULE 1

Always do your minimum market prep.

Know all your rules, spend 15 minutes everyday on quizlet
15 minute simulations
45 minute meditation
7:45 hours of sleep

15 minute meditation
re-memorize new rules, reread market review
skim substacks
check weekly economic news

prepare levels
set alerts
thesis for the day?
expected volatility?
allowed to take breakout trades?
planned trades?

RULE 2

Always follow your breakout trade rules.

You cannot trade breakouts/breakdowns unless:
Solid, noticeable breakout from a daily timeframe balance area
1-3 day consolidation after a big move (Think 3BP)
Breaking news that price is digesting

RULE 3

Always follow your premarket trading rules.

Pre-market trading is allowed past 8:30 AM.

All trades must be failed breakdowns or first-test shorts.
Ignore volatility requirements.

RULE 4

Always be in the market during your scheduled work time.

Must watch the market from 9:30 to 10:30 AM.
Must watch the market from 10:30 to 11:00 AM if orderflow is tradable.
You must engage in market-related activities from 10:30 AM to 12:00 PM
One fifteen minute break from 11:00 AM to 12:00 PM

All tests of major levels from 9:30 to 16:00 must be looked at.

RULE 5

Always follow your risk management guidelines.

You can trade up to a maximum of 4 lots per trade.
Max stop is always $1000
Daily loss limit is $2000

$250 is a loss

If you are $150 or less from your maximum loss limit, you cannot enter into any new trades or adds.
Always place your stops so that your trades will never exceed the daily loss limit.

Anytime you exit from watching the market check your limit orders and lock yourself out of trading.

RULE 6

Always follow your trades per level rules.

6 lot traded max per every major level
A winning trade (>$250) adds one lot, up to two lots
The maximum loss per level is $2000.

RULE 7

Always follow your green level rules.

Treat green levels as major levels for shallow failed breakdowns or first-test shorts, as well as major levels for exiting trades.
Price does not have to tick below the green level for shallow failed breakdowns.
Ignore first-test/area test requirements for first-test shorts.
Always follow every other rule.

Price must always travel 20 pts after a green level is tested before it can be traded again.

RULE 8

Always trade level-to-level.

The level you are trading must be yellow or red
Price must touch the level first before you trade it
All your entries must be within 5 points the level
Do not enter into a reversal trade without it touching a S/R level (no momentum!)

Anytime you hit a red major resistance (if long) or a yellow major support (if short) or a green major trendline you must always take off a lot. If you have more than one lot or if you have already taken off a lot, you can keep any number as runners.

Anytime price tests within 2 ticks of a minor level (grey, blue, red/yellow if same-side, mancini's levels, prior intraday level/area) you can take off as much size as you want. If the level shows adverse orderflow corresponding to volatility follow the rule for a major R/S.

RULE 9

Always mark significant levels.
A low/high that goes 20+ point is a significant level.

When several failed breakdowns originate from the same low, group them together in a level cluster. Any failed breakdown trade must enter above the level cluster.

When price trades 5 points above a red level it becomes a minor gray level. If a red level that has had a first-test short touches a yellow level OR has traveled 20 pts, it becomes a minor gray level.
When a yellow level has a successful shallow failed breakdown that touched a red level OR has traveled 20 pts, it becomes a minor gray level.
When price trades 5 points above a extended failed breakdown level it becomes a minor gray level.

RULE 10

Always follow your rules on adding size.

All adds must be valid trades on their own.
Do not place momentum adds.
Do not adjust the stop losses for each trade.

RULE 11

Always step away from the market if you break a critical rule.

If you break your risk management guidelines (Rule 5) or your trades-per-level rules (Rule 6), you cannot trade for the rest of the day.

TRADE TYPE 3: CONSOLIDATION BREAKS

NO BREAKOUT TRADES FOR NOW

1. Volatility must be medium or above
2. Buyers must test the resistance level
3. Price must rotate within 3 points of the level.
4. Price must stay there for a length of time determined by volatility.
5. Sellers must be essentially absent throughout this time.
6. Sellers must not show any apathetic action.
7. Sellers must be at their weakest at the time of entry.

aka Absentee breakouts

TRADE TYPE 4: RETRACEMENT BREAKS

NO BREAKOUT TRADES FOR NOW

1. Volatility must be medium or above
2. Buyers must test the resistance area.
3. Sellers must enter the market and retrace price beyond 3 points of the level
4. Buyers must then retest the area.
5. Sellers must become weaker and weaker for each retest of the level until they are absent for a time corresponding to volatility.

aka Balance Area breakouts or Non-consolidation Breakouts

TRADE TYPE 1: SHALLOW FAILED BREAKDOWN

1. Volatility must be medium-low or above
2. Sellers must tick beneath the level
3. Price must reclaim above the level
4. 3 Minute EMA must always be at or above the level.
5. Buyers must show some form of strength.
6. Entry must be above the level or level cluster, within the 5 minute Bollinger bands, and within 5 points of the level.
7. Stop must be 2 points below the low

TRADE TYPE 2: EXTENDED FAILED BREAKDOWN

1. Volatility must be medium-low or above
2. Sellers must tick beneath the level
3. Price must reclaim above the level
4. 3 Minute EMA must cross below the level.
5. Buyers must show some form of strength.
6. Entry must be above the level or level cluster, within the 5 minute Bollinger Bonds, and within 5 points of the level.
7. Stop must be 2 points below any level but no more than 10 points total

TRADE TYPE 5: FIRST-TEST SHORTS

1. Must be during RTH hours.
2. This must be the first test of the level since its creation.
3. This must be the second or third test of the area since it was traded through.
4. There must be a flush or some sort of apathetic reaction at the level, with a greater reaction for greater volatility.
5. The 3 Minute EMA must always stay below the level.
6. Entry must be below the level, within the 5 minute Bollinger Bands, and within 5 points of the level.

TRADE TYPE 6: LIQUIDATION BREAK

NO LIQUIDATION BREAKS FOR NOW

1. Volatility must be absent.
2. There must be some apathetic reaction at the highs.
3. Buyers must have formed at least two balance areas on top of each other.

TRADE TYPE 7: LIQUIDATION BREAK V

NO LIQUIDATION Vs FOR NOW

1. Volatility must be low.
2. Buyers must stabilize price.
3. Sellers must disappear.
4. Price must be at any visible or historical level.

TRADE TYPE 8: SHORT SPX 0DTE SPREADS

1. Strike must be at least 30 points away from the underlying.
2. You can enter for a maximum of 20 CCS, 15 of which can be 0.3-0.35 CCS
3. Hedge zone is always 5 points below your strike price
4. You have the option of scaling out at 50% max profit or setting a BE stop at that time.
5. You have the option of hedging through PCS or exiting the trade entirely.
6. Always hedge before to limit your loss to 40% of the spread width (2.00).