Jesse Livermore 3 point range b/d failure setup
One of the setup Livermore used was a failed range breakdown setup. If a stock tired to breakdown below long term range and then reversed and went up 3 points or more he would buy the stock.
The same idea applies on short side. A stock breaks out of range and then fails and goes down 3 point then it is short.
How can you find such setups.
Jesse Livermore b/d failure setup
In this range bound market you will find lot of these kind of setups. Because breakouts as well as breakdowns keep failing.
Setups are fractal in nature.
If you are day trader you will find several setups like this on intraday basis. A stock breaks down and then quickly reverses and makes sharp move and same thing happens on long side.
B/o failure setups are very common.....
Jesse Livermore Setups
1 b/o to 52 week high
2 Round number pivots
3 IPO range breakout
4 New low /new high b/o failure setup
His primary setup idea was longer term range breakout. He was primarily a position trader when he made the big money (first 10 years or so in his career he was scalper/day trader)
He believed real money is made in big moves. And his setup choices reflected that.
In conclusion his primary setup idea was range breakout. The variation of range breakout failure still was based on his primary setup ideas. IPO b/o is again a variation of his basic range b/oi idea.
You will find that most trader trade only one basic setup. They become master at it. And wait for favorable market for that setup.
It is possible to develop 100 or more setup ideas but to trade them successfully you need to master each of them. Most traders don't do that. They specilaze in few setups.
Reproduced from the Stockbee members site. On the members site there is more extensive discussion on these setups and how to set them up in Telechart.