Specific Trade Setups for Today's Markets
This chapter describes some of the specific trade setups I have developed for use in my trading. All traders gravitate toward certain setups over others, so it is useful to build a toolbox of specific trades from which to pull depending on the market conditions that exist at the time. You might even improve on these setups or develop your own variations. It is best to use the work and insights of others as a foundation upon which to build your own personal methods. In so doing, you will progress beyond simple pattern recognition to full integration, which will make you an even better, more confident trader. Each specific trade setup will be discussed and then accompanied by rules and examples for maximizing your trading performance with that particular trade. Let's start with the Cradle Trade.
THE CRADLE TRADE
I have always used moving averages on my price charts, from the first day I viewed a price chart. Moving averages are so helpful in revealing structure, trend, and potential trading opportunities on pullbacks to the averages. It is no surprise then that one of the first trade setups I developed for myself was the Cradle Trade.
Specifically, the Cradle Trade requires the 20- and 50-period exponential moving averages on any timeframe. The Bullish Cradle forms when the 20-period EMA crosses above the 50 EMA, and I label the exact spot of the crossover as the “Cradle.” Similarly, the Bearish Cradle forms when the 20-period ...