In your trading journey you will have significant breakthroughs once you learn the language of setups. Profitable traders think in setup language while novices think in individual stock term.
Setup is a set of conditions that needs to be present for a stock to be considered for trading. A setp definition includes what kind of stocks to trade, when to enter them, where to put stop, where to exit , and how to manage the trade during its lifetime.
If you see many trading blogs or services they talk about several tickers without setup context. You should just ignore them unless setup behind that ticker is clear and can be explained in plain English.
If someone just highlights a ticker grill them about their setup and process.
Setups and processes can be learned and duplicated.
If you understand and perfect a setup you do not someones stock picks. If you know the setup you can find and trade same stocks as the other person without relying on their pick.
Many traders are secretive about setups as they know if setup is shared then why would anyone pay for their picks.
But if you want to be independent and profitable trader you must focus on setups and ignore all stock picks. Once you learn a setup idea you can find your own picks.
Do a systematic hunt for setup. Most commonly used setups have survived for hundreds of years.
Look for and study most commonly used setups and learn the basic market structure behind them. From those setup ideas select few and focus on them.
Setup oriented thinking is process based thinking. It involves series of steps to be followed with logical reasoning for the same.
It is how do I find this kind of stock again and again kind of thinking. It is about ways to catch a fish.
Setup selection is key to successful trading.
Setup selection allows you to condition your behavior.
It allows you to develop your procedural memory. It allows you to automate your thinking.
Lot of people think psychology is most important, but it is not unless you have right setup. If it was all about psychology , then most successful traders will be psychologists.
When it comes to setup selection your time frame is very critical.
A setup that is good for day trader may not be good for swing trader. A swing trading setup may be extended setup for position trader.
The steps in trading expertise development are:
Vehicle selection
+
setup selection
+
procedural memory development
+
self efficacy beliefs
+
situation awareness
+
risk management
+
right psychology
=
Profitable trading
If you want to make millions trading , first find a good setup idea.
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