Setup is a set of conditions that should be present to take a trade.
Basic Setups are:
1 breakouts : start of a swing move long term or short term is indicated by a b/o Breakout is a setup in which price makes a N day high. basic logic stocks move in momentum bursts
2 pullbacks: a major or minor correction in trend but the dominant trend is still up or down. Pullbacks can be short term swing setups or long term setups. Basic logic stocks in uptrend lose momentum for short period of time or momentum slows down. Enter during such slow momentum phase hoping stock will go back in momentum phase
3 exhaustion: exhaustion setups indicate end of a major trend (up or down). Exhaustion may or may not lead to trend change in new direction. Basic logic buyers exhaust themselves leading to reversal same thing on sell side. These do not necessarily look for trend change , but look for the short term bounce once selling exhausts itself.
4 pivot : setups are specific anchors which lead to buy or sell decision. It might be particular price or catalyst or level. These can be news pivots, % pullback pivots as in Fib, or volatility or range based pivots. The basic assumption is such pivots lead to start of momentum or end of momentum.
5 Support and resistance: basic logic is buyers buy at support and sellers sell at resistance. Or at the support or resistance level there is historical buy and sell pressure.
These are some of the commonly used setup ideas. If you innovate around them you can develop your own setups.
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