Refined Entry Criteria
This document outlines refined entry criteria for our high-confidence options trading setups, designed to achieve an 80%+ win rate by being highly selective about which trades to take.
- Multiple Confirmation Requirement: Each setup now requires a minimum of 4 confirmation signals (increased from 3)
- Stricter Technical Parameters: Tightened ranges for technical indicators
- Enhanced Market Context Filters: Added broader market condition requirements
- Quantifiable Entry Conditions: All criteria are specific and measurable
- Layered Confirmation Approach: Primary, secondary, and tertiary confirmation levels
Primary Technical Conditions (ALL must be met)
- Bollinger Band width contracting for exactly 5-7 consecutive days (not more, not less)
- Current Bollinger Band width in the bottom 15% of its 3-month range (tightened from 20%)
- Volume declining for 5 consecutive days, with current volume at least 30% below 20-day average (stricter than previous 20%)
- Price must be in the upper 1/3 of the Bollinger Band range, but below the upper band
- RSI between 50-60 (narrowed from 45-65)
Confirmation Signals (at least 4 must be present)
- MACD histogram flattening after a period of decline, with at least 3 consecutive smaller bars
- Daily ATR (Average True Range) declining for 4+ consecutive days (increased from 3)
- Implied volatility in the bottom 20% of its 3-month range (tightened from 25%)
- META price within 2% of a significant resistance level (new requirement)
- Volume profile showing low volume node at current price level (new requirement)
- Negative divergence on 4-hour chart RSI (new requirement)
- Bearish candlestick pattern on daily chart (Shooting Star, Bearish Engulfing, Evening Star)
Market Context Requirements (ALL must be met)
- VIX between 15-25 (narrowed from 15-30)
- META showing relative weakness vs. NASDAQ (minimum 2% underperformance over 5 days)
- NASDAQ showing signs of resistance or topping pattern
- No META-specific news or earnings within 15 trading days (extended from 10)
- No major market events (Fed announcements, CPI data, etc.) within 72 hours
- At least 60% of technology sector stocks below their 20-day moving averages
- Market breadth indicators showing deterioration (declining advance-decline line)
Primary Technical Conditions (ALL must be met)
- Price within 1% of a major support level (tightened from "approaching")
- Support level must be validated by at least 2 previous bounces
- RSI showing positive divergence with at least 3 degrees of separation
- Volume increasing for 3 consecutive days as price approaches support
- Price must remain above the 50-day moving average
Confirmation Signals (at least 4 must be present)
- Bullish engulfing candle or hammer candle with at least 1.5:1 size ratio
- MACD histogram turning positive from negative territory with increasing momentum
- Stochastic oscillator below 20 with bullish crossover
- Implied volatility increasing by at least 15% as price approaches support
- Volume spike of at least 50% above 20-day average on reversal day
- Positive divergence on multiple timeframes (daily and 4-hour)
- Fibonacci retracement level coinciding with support (61.8% or 78.6%)
Market Context Requirements (ALL must be met)
- VIX between 15-25 (narrowed from 15-30)
- META showing relative strength vs. NASDAQ (minimum 2% outperformance over 5 days)
- NASDAQ showing signs of support or bottoming pattern
- No META-specific news or earnings within 15 trading days (extended from 10)
- No major market events within 72 hours
- At least 60% of technology sector stocks above their 20-day moving averages
- Market breadth indicators showing improvement (rising advance-decline line)
Primary Technical Conditions (ALL must be met)
- Bollinger Band width contracting for exactly 5-7 consecutive days
- Current Bollinger Band width in the bottom 15% of its 3-month range
- Volume declining for 5 consecutive days, with current volume at least 30% below 20-day average
- Price must be in the upper 1/3 of the Bollinger Band range, but below the upper band
- RSI between 50-60 (narrowed from 45-65)
Confirmation Signals (at least 4 must be present)
- MACD histogram flattening after a period of decline, with at least 3 consecutive smaller bars
- Daily ATR (Average True Range) declining for 4+ consecutive days
- Implied volatility in the bottom 20% of its 3-month range
- QQQ price within 2% of a significant resistance level (new requirement)
- Volume profile showing low volume node at current price level (new requirement)
- Negative divergence on 4-hour chart RSI (new requirement)
- Bearish candlestick pattern on daily chart
- Semiconductor index (SOX) showing relative weakness to QQQ (new requirement)
Market Context Requirements (ALL must be met)
- VIX between 15-25 (narrowed from 15-30)
- Technology sector showing relative weakness vs. S&P 500 (minimum 1.5% underperformance over 5 days)
- S&P 500 showing signs of resistance or topping pattern
- No major economic announcements within 72 hours (extended from 48)
- At least 60% of NASDAQ 100 stocks below their 20-day moving averages
- Market breadth indicators showing deterioration
- Treasury yields showing upward pressure (new requirement)
Time of Day Restrictions
- Only enter trades between 10:30 AM - 11:15 AM ET or 1:45 PM - 2:30 PM ET
- These narrower windows (reduced from previous ranges) represent the most stable market periods
Market Internals Confirmation
- TICK index must be aligned with trade direction (positive for longs, negative for shorts)
- NYSE Advance-Decline line must confirm market direction
- VIX must be stable (not changing more than 3% in the past hour)
Options-Specific Requirements
- Minimum option liquidity: 500+ open interest and 150+ volume
- Maximum bid-ask spread: 3% of option price
- Delta requirement: 0.45-0.55 (tightened from 0.40-0.60)
- Minimum 7 days to expiration (to avoid gamma risk)
Entry Execution
- Use limit orders only, no market orders
- Set limit price at the mid-point of bid-ask spread
- Allow maximum 5-minute window for fill, then reassess setup
- No chasing - if price moves more than 2% from signal, skip the trade
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