What do you think tho. Make a strong strategy

Here’s the cleanest “strong” version of this that fits your style: a **rules-based daily playbook** using Tokyo + FX to hunt for mispriced U.S. ADRs of Japanese stocks, with a **mean-reversion core** and a **momentum override**. --- ## 1. Core view 🎯 The most repeatable edge you can realistically exploit is: > **Each U.S. morning, trade only the biggest gaps between “Tokyo+FX fair value” and the U.S. ADR price, then bet on that gap closing _intraday_ — unless the U.S. tape clearly extends the Tokyo trend, in which case you flip to momentum.** You’re not trying to arb pennies; you’re swinging for **1–3% intraday on the ADR** with **tight risk and small universe**. --- ## 2. Universe & timeframe 🧩 **Universe (liquid ADRs / U.S. listings):** - **Banks:** MUFG, SMFG - **Industrial / tech / consumer:** Hitachi (HTHIY), Sony (SONY), Toyota (TM), Nintendo (NTDOY) - Optional: Mitsubishi Corp (MTSUY), Itochu (ITOCY) if liquidity is ok for you. **Timeframe:** - Primary: **intraday (open → close)** - Secondary: **1–2 day swing only when U.S. session confirms Tokyo’s move**. --- ## 3. Signal: Tokyo + FX → “fair” ADR move 📐 For each stock every day: 1. **Tokyo return (local yen):** \( r_{JP} = \dfrac{P_{JP,t} - P_{JP,t-1}}{P_{JP,t-1}} \) 2. **FX return (USD/JPY):** \( r_{FX} = \dfrac{FX_t - FX_{t-1}}{FX_{t-1}} \) 3. **Previous U.S. close:** \( P^{ADR}_{t-1} \) 4. **Fair ADR price for today:** \[ P^{fair}_t \approx P^{ADR}_{t-1} \times (1 + r_{JP}) \times (1 + r_{FX}) \] 5. **Pre‑open / open ADR price:** \( P^{mkt}_t \) 6. **Mispricing (your trading signal):** \[ \Delta_t = \dfrac{P^{mkt}_t - P^{fair}_t}{P^{fair}_t} \] Interpretation: - **Δ < 0** → ADR is **cheap** vs Tokyo+FX. - **Δ > 0** → ADR is **rich** vs Tokyo+FX. --- ## 4. Strong, simple rules ✅ ### 4.1 When to trade (filters) Trade **only** when all of these are true: 1. **Magnitude:** \(|\Delta_t| ≥ 2.0\%\) 2. **Liquidity:** - ADR average daily volume ≥ **300k–500k** shares - Opening spread ≤ **0.5%** 3. **No landmines:** - Skip if: earnings day, major guidance, or BOJ/Fed/CPI _that morning_ for the banks. If none of your names hit |Δ| ≥ 2%, **do nothing**. Edge is in saying no. --- ### 4.2 Trade directions **A. Mean reversion (default mode)** 1. **Cheap ADR – long:** - Condition: **Δ ≤ −2%** (ADR underreacting) - Action: - **Buy the ADR in first 10–20 min** after open, when spreads settle. - Targets: - Base target: ADR closes at or within **0.5–1.0%** of \(P^{fair}_t\). - Hard exit: **by U.S. close**, win or lose. 2. **Rich ADR – short / puts:** - Condition: **Δ ≥ +2%** (ADR overreacting) - Action: - If borrow & spreads are fine: **short ADR** at open. - If borrow is bad: **same‑week ATM puts** instead of stock. - Targets: - Same as above: look for move back toward **\(P^{fair}_t\)** by close. **B. Momentum override (when not to fade)** Avoid fading Tokyo when the U.S. is clearly extending it: - Let **SPY** and **EWJ (Japan ETF)** be context. - If Tokyo was **strong up**, and: - SPY + EWJ are **green > +0.5%**, and - Your ADR **opens above P_fair and keeps grinding higher in first 30–45 min**, then **skip the short-mean-reversion trade**. Optional: flip to a **small long** in direction of the move. Same idea for strong down days. --- ## 5. Entries, exits, and sizing 💰 ### 5.1 Position sizing - **Per trade risk:** - Aim to risk **0.5–1.0% of account** _per name_. - **Daily cap:** - Max **2–3% of account** total risk across all these trades. - Practically: if your stop is **1.5%** on the ADR, size shares so: \[ \text{Position \$} \approx \dfrac{0.5\%\text{ of account}}{1.5\%} \] ### 5.2 Concrete stops & targets - **Stop-loss:** - If ADR moves further by **+1.5% against you** from entry, you’re out. - Example: you buy MUFG at $10.00; stop around **$9.85**. - **Take-profit:** - First target when the ADR closes **half the gap** to \(P^{fair}_t\). - Second target (if you scale): when ADR is within **0.5% of P_fair** or you hit **+2–3%** intraday on price. - **Overnight hold (only for the best setups):** - Only hold overnight when: - The ADR moved **in your favor** during U.S. session. - U.S. close is still **meaningfully mispriced vs up‑to‑date Tokyo+FX**, _and_ - No big scheduled macro / stock catalyst before Tokyo open. - Otherwise, **flatten by U.S. close**. --- ## 6. Turning it into your daily playbook 📋 **Pre‑Tokyo close (optional, if you’re keen):** - Note key events: BOJ, earnings, big macro. **After Tokyo close (≈ 2–3am ET, you can do this later):** 1. Log **P_JP,t, P_JP,t‑1, FX_t, FX_t‑1** for your 6–8 names. 2. Compute **r_JP, r_FX, P_fair** for each. **U.S. pre‑open (9:20–9:30 ET):** 3. Grab **indicative ADR prices / pre‑market prints**. 4. Compute **Δ_t** for each. 5. Shortlist only names with **|Δ| ≥ 2%** and no events. **Open → first 30 minutes:** 6. Wait for spreads to tighten. 7. Check SPY & EWJ: - If they confirm Tokyo’s direction and ADR is still extreme, **take trades**. - If everything reverses violently at open, **size smaller** or pass. **Intraday:** 8. Watch for **gap closing toward P_fair**. 9. Take profits in 1–3 legs; hard flat by close except A+ setups. --- ## 7. How this matches your style 🧠 - You like **short‑term, event‑aware momentum**. This gives you: - A **quantitative signal** (Δ on ADR vs P_fair), - Tied directly to **real underlying flows** (Tokyo session + FX), - With **hard rules for entries/exits**, so it’s not just vibes. - Over time you can: - Track your **hit rate** and average **R per trade**. - Tighten thresholds (e.g., only |Δ| > 2.5%) if you want fewer but higher‑quality shots. --- If you want to push this to the next level, I can: - Design a **very small “A‑list”** (e.g., just MUFG, SMFG, SONY, TM) with **specific default stops and position sizes**, or - Add a **simple options overlay** (which strikes and expiries to use when you get |Δ| > 3%+). Which would you rather have next: a **4‑name “A‑list” playbook with exact sizing rules**, or an **options‑only version** of this strategy for days you want more leverage?