Trading Method Setup Evaluation

Day Trading Setup Visualization

A key problem for trading is always going to be real time decision making.  How many times have you missed your trade because you didn't see the setup until after it triggered?  OR how many times did you miss a trade because it 'triggered too fast' for you to do the trade? 

Not only are these situations frequent trading problems - they also have the tendency to lead to a series of additional trading issues - for instance:  (1) you miss your trade entry AND then you watch what becomes a very profitable trading swing that even included a profitable addon trade - without making any attempt to enter the swing  (2) you miss your trade entry AND then you 'chase' the trade - entering before there is a 'next' base setup which invariably becomes an entry at a left side support or resistance point that holds AND instead of continuation after your entry - you enter right ahead of a resumption of the left side swing.

Recognizing your trade setups real time is going to be a function of having defined these setups to the extent that you are waiting for them to occur -vs- trying to react to them as they trigger - again leading to missed trades because you didn't see it, or it triggered to fast, and then further leading to reaction trade chases.

Can you see YOUR favorite base setup - see the specific setup components that are a part of that setup - components that include the combination of left side-right side?  I think of this as day trading setup visualization AND the better that I can see this in my mind, the better I am going to increase my preparation time AND be waiting for the setup that I 'see' to trigger - always remember this is a key trading method concept - that of setup-trigger NOT trigger only. 

IF I can visualize my trade setups, I have eliminated a lot of the real time trade decision with regards to trade recognition AND can focus more on making decisions in the context of market conditions, and the trade filters that keep from doing the trade when it triggers, even though it is regarded as a base setup.  For instance, I have a strong up swing that ends with a pmd high and goes into consolidation.  I now know that I am looking for a pmd-failure to continue the swing OR a pmd-swing reverse to 'allow' me to trade in the opposite direction - I can visualize what these setups look like AND will see them if/when they occur. 

In light of this, my focus can go to 'the market' - I can think of the directional strength of the left side swing AND I can find the key support point for that swing.  What might now happen - I get the pmd-swing reverse setup instead of swing continuation BUT I see that it is triggering right at support to the up swing AND even though I have a base setup - I have a filter not to take the trade yet on its initial trigger.

As we are limited in how many things that we can think of/focus on at the same time - this limitation is certainly the basis behind the real time trade decision issues AND when coupled with the 'speed' that the market can move through a trigger IF the trader isn't prepared - this limitation becomes magnified.

Trade Setup Component Selectivity

This is a table that we have used/discussed a number of times - I suggest going to the following webpage both to review the discussion AND the additional training sessions that are linked to the page:  day trading setup selectivity 

Also think of this table in terms of visualization.  IF these are base trade setup components, with each additional dot being one more component AND an addition to the selectivity of the setup - THEN you should be able to 'see' these in your mind - you should be able to recognize these as they have developed.  Now your focus can go below the dark blue line, where you can consider these components in terms of adding additional selectivity to your trade setup AND in the context of 'matching' these to directional strength - where the more counter a trade setup is OR the more congested a market is - the more selective you will be in your trade setup-trigger combination.

You are 'thinking trade' with regards to the things you can 'see' and are waiting for - you aren't 'rushing' yourself into right side indicator triggers, with little regard to any of the implications of whether that trade was actually setup.

Trading Setup Visualization Study And Development

My method of developing trade setup visualization - has been to add line drawings to the right side of an actual chart - those drawings being WHAT I would look for to occur for additional trading decisions.  I then would have a series of setup-trigger scenarios - that could be compared to the actual chart AND with regards to what the actual price movement was AND how I traded that movement.

Something that will become very interesting, and in turn very significant to your trading, is how few right side trade setup scenarios there really are, which of course is an aid in visualization-real time recognition.  Trading then becomes a function of taking these repeating price segments AND making decisions based on how they 'fit' with the left side and current market conditions.

What Are The Key Price Specifics And Shifts For The Red Dot Sell?

• can you visualize what a first continuation trade if flat would look like?

• can you visualize what a buy reverse would look like?

• can you visualize what a sell addon would look like?

the key left side price specific at this time is the purple line - the left side channel/resistance continuation breakout.  it is key in that it is current support at this time to the left side up swing - so in order for there to be further continuation to the red dot sell - this price will have to break AND shift to resistance.  i will also be aware of the dark blue line as the higher low/retest of the purple line BUT these are essentially the same price.  on a break of the purple line - the bottom dark blue line is the next target - the area of the chart reverse from sell to buy.

in this area i will be watching for any 'next' setup to either be at the purple or yellow line and/or a setup that includes a break/failure of those lines.

yellow dot:  since i am short AND price is at left side support - i know where my partial target is BUT i also have to know what an exit of the trade would be AND consider the left side swing - i want to also know what a resumption-reverse back long would look like.  IF price hits the purple line THEN retraces back to the yellow line - i would look for a higher low hold of the purple line as the 'start' of a exit-reverse setup. 

i don't like buying the yellow dot as what would be the initial indicator reverse - that trade would be a break right at what has become left side resistance/yellow line AND at this point also being lower than irisk to the sell - there also isn't an exit. 

purple dot:  this would be the buy reverse - the break2 of the blue line AND you should be able to visualize that the retrace from the yellow dot break to the higher low would be with mex flow up - this setup is a break-failure setup of the yellow line remaining resistance.

blue dot:  consider the blue line/yellow dot testing-rejecting the yellow line AND then breaking back through the blue line - followed by the yellow line lower high - the blue dot is the first continuation trade done as a triple diagonal break AND this is the break-failure setup of the purple line remaining support.

purple dot:  this is a first continuation trade to the red dot sell on break2 of the blue line - break1 would be a support breakout chase - you can take this trade IF:  (1) mex is still flowing down (2) this setup is not into a pmd.  the thing to 'see' at this time - is that you are trade trading the momentum-continuation of the initial break.

yellow dot:  this is an area for addon setups BUT the setup must include failure of the dark blue line to remain support.  the yellow dot may be a break setup of the dark blue line as break2 BUT it's not a failure setup.  don't look at the purple dot and the yellow dot and call them the same setup.  yes they are both break2 of a line BUT consider this in the context of the red dot and the initial break2 into sell - the distance between the setup and the trade AND the momentum at the time.  it would be typical for the yellow dot/dark blue line be a pmd AND at a pullback to left side support WITH a pmd - is a base mixed method trade.

red dot2:   the red dot is the failure setup - in this case a pmd failure AND a trade into the prior 2 breaks of the dark blue line - don't enter on a breakout of those prior 2 breaks WHICH would be a non-setup chase.

this is the actual right side chart after the red dot sell. 

yellow dot:  there was nothing done at the yellow dot/initial indicator reverse back to buy - there is no setup here AND the initial short was still trailed for a hold of left side resistance at the yellow line.

red dot2:  resistance held AND moves back to the dark blue line WITH the momentum indicator flip - there is no trade setup here - there is nothing here to indicate failure of the dark blue line to remain support.  the failure setup comes at the red dot as a triple diagonal break of the 2 dark blue dots - this was done as an addon.