How to Create Profitable Trading Setups

How to Create Profitable Trading Setups

When you trade daily it will be fascinating realm and more like magic to novice traders about the financial markets. The profitable trading setups are hidden in the day trading because it is infrequent, vibrant, and untamed. Profitable trading setups represents planned time moment and order price level when a trader can enter into trade and exit from the trade. In this blog let’s see about how to create profitable trading setups.

Technical and fundamental analysis can lead to profitable opportunities for traders who know how to read between the lines. Traders do live trading by using a trading plan, write trading thoughts, trading setups, and reasons why they entered into trade. They can avoid bad practice trades after this plan analysis.

Traders can use quantitative trading, it helps the traders to analyze past performance, strategies, create models that have better accuracy than random trades systems or some simple trading rules systems. They can classify winning and losing trades, by using machine learning.

How to Create a Forex Trading Setup?

To create a simple Forex trading setup and execute the first trading order in any trading platform you need to start your trading platform, open the chart, add indictors on the chart, place the order, set the trading size in lots, stop loss price level and take profit level, get order confirmation, wait for some time to see realized trade, after the trade created you can see it on the platform, as the last step check the size, stop loss, and target level to be sure.

Impulsive Pullback-Consolidation Breakout Setup

An impulsive wave starts in one direction, when the market opens. This strong move happens during the first fifteen minutes of the market opening. The price generally tends to get normal, after this strong wave, which forms a consolidation, and the prices further sideways for a couple of minutes.

This consolidation process happens within the price range of the first impulsive wave. For an instance, if the price had fallen during the market opening, the price consolidation would bring the prices up, but it may not exceed the opening price.

Traders have to be careful as the price consolidation should happen in the same direction as the impulse wave. If the price had fallen in the impulse wave, the consolidation should not exceed the opening price. As a day trader, you can place a buy order a cent more than the consolidation price to sell it later at a higher price in such trade setups. If you are in a short position, you should place the trade to lower the consolidation price to buy it later at an even lower price.

An important thing to remember while doing this trade setup is that the consolidation should not be larger than the impulse wave as it makes the pattern less useful and effective. In the day trading this pattern can happen any time and multiple times. But it’s more effective when the market opens. If the pattern happens any time after that, the price changes would be significantly small.

The Reverse Consolidation Breakout Setup

Nothing is fixed in stock market. So it is not necessary that each of the consolidations would be smaller than the impulse wave. Simply reversal is that one big moves often happens in one direction, and other happens in the opposite direction.

If the consolidation move exceeds the opening price and reaches some point, it will act as a reversal. In such times, hold back a little and witness the market. If the price breaks above the consolidation level, you can go long. If you want to buy stock in such times, you can place the buy order to profit with a higher price later.

How to Create Profitable Trading Setups
How to Create Profitable Trading Setups
Reversal Pattern at Support or Resistance Level

 If the stock price falls when it touches the $55 level, and such incidents have happened at least two times. This $55 level is called the resistance level. If the price of the same stock bounces back whenever it reaches $40, and that has happened at least twice, the $40 level is called the support level. In both support and resistance levels the reversal happens, as it changes a stock trend. Thus, both levels act as pricing areas.

You should wait for the price to consolidate at either of the levels, in such trading setups. If a reversal happens as the prices increase even a cent above the consolidation near the support level or one cent down the consolidation near the resistance level, you can expect a bounce-back or fall of prices.

Though if the price breaks the support level, you can expect a downturn for the stock. You can expect an upward trend for the stock, if the price breaks the resistance level. Here consolidation acts as trading signals by breaking the support or resistance level.

Strong Area Breakout Setup

The strong breakout area occurs when the price of the stock crosses the support or the resistance level. This strategy is very challenging but is powerful. For an instance, the stock continuously falls when it touches the $55 level. But if it crosses this level, it does mean that a new trend will start.

Though many times, a breakout doesn’t necessarily mean a big move. And if that happens, the impact of this profitable trade setup reduces.

False Breakout

The stock market is unpredictable and many times goes in the opposite direction than it shows. In such cases you can use the strategy of a false breakout. For an instance, you are trading as per the impulse pullback consolidation trade setup; if the price is falling at the market opening, you would expect the consolidation to be a little upward but not more than the open price.

If the stock follows this pattern of a false breakout, you can take your position accordingly. But if the current price goes beyond the opening price, it can be a new trend. And you can take the trade as started in the reverse consolidation breakout setup.

Final Thoughts

Be confident of your knowledge, skills and experience as a trader, whichever strategy you chose. Analyse the diverse scenarios before choosing a profitable trading setup. Combine all your researching skills into trading. You can also perform this mix and match on the practice trading account available online. With experience and persistence, you would develop your own profitable trading setups suitable for your requirements and risk appetite.

Visit us on:

%d bloggers like this: