Four Basic Trade Setups
This chapter presents four basic trades setups that you can use as templates when creating your own trades. Allow your creativity to guide your analysis or depend more on the quantifiable mathematics of the trade: the possibilities are numerous. These specific setups work for any market, stock, or timeframe. Before we address the basic setups, we must start with a discussion on the four components present in any trade you will ever take.
COMMON COMPONENTS OF EVERY TRADE
Any trade you take has a broader context, and no trade exists in isolation. Though it may seem simple to non-traders, the act of entering and exiting a particular trade is actually much more difficult than clicking a mouse button two times. To a non-musician, playing the trumpet may seem easy, as the instrument only has three keys to press. There is a huge difference between blowing air into an instrument while pressing one of the three keys and a professional trumpet player who masterfully combines rhythm, tone, dynamics, and other elements of music as represented by pressing the three keys at the right time in the right combination to the right rhythm. Professional traders perform a similar incorporation of many factors at once to produce profits instead of music.
Entering and exiting trades is actually very simple, but doing it masterfully may take as long as it takes for a musician to progress from a beginner to a professional. Trading is a performance discipline not very different ...