New SPY Options Trend-Following Strategy

Welcome, traders! The market’s recent dance, sparked by shifts in the trade war, has prompted me to refine my approach to SPY options. 

My new Trend-Following Strategy targets one high-probability trade daily, leveraging 2-minute candlestick color changes, exponential moving averages (EMAs), and the 15-minute range.

Tested with one contract, I’ll document results here, turning each session into a lesson in growth. 

As a day trader, I’ve learned that systems aren’t just tools—they’re reflections of mindset. 

This post unveils the strategy, recaps today’s trade, and explores how patience and adaptation shape success. 

Whether you’re scalping SPY or building your edge, join me on this journey of evolution.

Strategy Overview: A Blueprint for Precision

This strategy focuses on 1 DTE (one-day-to-expiration) SPY options, designed for agility in 2025’s volatile market. 

It balances risk and reward with a 30-cent stop-loss per contract, utilizing the 15-minute range and EMAs (8, 21, 48, 200) for setups, triggered by 2-minute candlestick shifts.

Gap scenarios target 200 EMA mean reversion, aligning with my one-trade philosophy. 

Exits prioritize discipline, closing before 3:55 PM or when the trend fades.

• Market: SPY options (1 DTE)
• Chart: 2-minute candlestick
• Indicators: 8, 21, 48, 200 EMA
• Risk: 30-cent stop ($0.20 for gap volatility), one contract
• Session: 9:30 AM – 4:00 PM ET

Rules: The System’s Backbone

Daily Range

Mark the 15-minute high/low (9:30–9:45 AM) to frame the day’s action. This range, tested in recent sessions, sets the context for my trading session.

Trend Identification

• Bullish: 8 > 21 > 48 EMA, price near/above 200 EMA.
• Bearish: 8 < 21 < 48 EMA, price near/below 200 EMA.
• Skip if EMAs are tangled, avoiding chop— a lesson from past trades.

Gap Setups

• Bullish (Gap Down): Calls on a green candlestick near the range low, targeting 200 EMA reversion.
• Bearish (Gap Up): Puts on a red candlestick near the range high, targeting 200 EMA reversion.

Standard Setups (Post-9:45 AM)

• Breakout: Calls on a green candlestick breaking the range high (8 > 21 EMA).
• Breakdown: Puts on a red candlestick breaking the range low (8 < 21 EMA).
• Pullback: Calls (green at 8/21 EMA above range) or puts (red at 8/21 EMA below range).
• Reversal: Calls (green after range low rejection) or puts (red after range high rejection).

Entries and Risk

• Enter one at-the-money or slightly out-of-the-money contract on candlestick close.
• Risk: 30-cent stop ($0.20 for gaps).

Exits

• Target 1:2 or 1:3 risk-reward ($0.60-$0.90).
• Exit on EMA crossover, range break against position, opposing candlestick, or near 200 EMA (gaps). Close by 3:55 PM.
• One Trade: Limit to one setup daily; skip if unclear by 2:00 PM.

Today’s Trading Session: A Lesson in Patience

SPY gapped down today, a move I initially eyed for calls during the rise. But I missed my entries (gray circles), waiting for rejection zones instead. 

The market’s strength suggested mean reversion, yet I pivoted to a bearish tail-bar entry near the 200 and 48 EMA (green circle), anticipating a rejection. 

The stock hit my stop criteria around -30 cents, resulting in a loss, as the price surged upward. 

SPY 2-minute chart 5/19/25

My focus on one trade held, but the miss stung.

• Trade: Bearish Tail-Bar at 200/48 EMA [Loss -30 cents]

• Missed Setups: Calls at rejection zones (gray circles) slipped by due to timing.

The gap’s strength favored reversion, a hindsight clarity I’ll refine.

Order Fills 5/19/25

The Lesson: Patience and System Refinement

Missing the “perfect” trade and taking a loss taught me what I need to focus on.

When we have gaps like these, mean reversion is a high probability opportunity. 

After the session, I noted the gap’s momentum and attempted to predict a rejection when the play was still in a mean-reversion phase.  

This loss, controlled by my 30-cent stop, was a “good loss”—showing me my errors.

Why Patience and Adaptation Matter

This day underscores two truths:

• Patience: Waiting for confirmed setups, such as a sustained 200 EMA rejection, avoids false moves.

• Adaptation: I’ll adjust my mindset to capitalize on gap strength, a valuable lesson from today.

These pillars are a key driver in turning losses into growth.

Conclusion: Building a Resilient Strategy

The -30 cent loss, though a miss, is a foundation for my SPY Trend-Following Strategy. 

Patience kept me in the game, and adaptation will refine it. 

In 2025, this system—paired with a resilient mindset—is my edge, transforming losses into a path of mastery. 

Stay tuned for more tests!

Action Steps: Refine Your System

After each session, journal: 

Did I wait for clarity? 

What adjustments can I implement to my setup? 

Patience and adaptation are skills—cultivate them.

Call to Action

What’s your biggest strategy lesson? Share below or follow me on X—let’s evolve together!