Focus on setups | stockbee

10/11/2010

Focus on setups

Setup selection is the key to profitable swing trading...
Define your setup and stick to it. Do not get influenced by others.
Here is a setup I like and I bought it today in a flash. It satisfies my setup definition.
alt text
Does the setup logic makes sense?
Does 4% b/o buy make sense.
Does a 4% buy only if certain conditions are met makes sense to you.
Does 5 to 20 sideways move prior to 4% b/o makes logical sense to you?
Does prior move relative linearity makes sense to you?
Think of these issues. Do some serious and deep thinking about these issues.
If you are convinced that what I say makes sense, then train your mind to find such setups.
Once you do that shut out all other noise and just execute it to best of your abilities.
Profit is an outcome of good setup selection.
Look for setups with 4:1 risk reward and stick to your method day in and day out.
You just need one good setup idea to make money in the market.
Setup selection requires micro skills.
If you do not agree with the thinking, develop your own setup logic.
But for your own sake stop taking trades based on others recommendations and based on method which you do not understand or can replicate.
The day you understand that setup selection is the key to trading profit your journey towards profitable trading will start...

4 comments:

Ty Coon said...

I had a few questions. Does the breakout volume matter or is it just if it's greater than the previous day?

What is prior move linearity mean?

And how can I tell if it has a 4 to 1 risk reward?

Pradeep Bonde said...

It has to be greater than previous day. But this stock I entered before a breakout.
Prior move linearity means how smooth was the previous trend.

to find 4 to 1 rewards you need to have target on the stock. I have a calculator which calculates R/R once you put in stop, entry and target.
http://goo.gl/HCjF

jt said...

Pradeep: if you buy 4% bo and your stop is lets say the low of the bo bar in order to get a 4:1 risk/reward the stock would have to go up by 16%? Isn't that a bit too much to require from majority of stocks/setups?
Regards

Pradeep Bonde said...

You have to be selective and not take every setup.