A+ Setup Example: February 26, 2024
Look Above and Fail
Over the course of nearly two decades, a few setups have became the backbone for my toolkit and profiting from the market. I evolved from losses, to breakeven, to a margin of profitability as I incorporated and refined these methods into a systematic and disciplined practice of trading.
No amount of indicators, substack, or trading gurus can substitute for those two fundamental cornerstones of trading - which all start with you. Furthermore, overload of information is likely to be detrimental, distracting your focus and self-understanding - inhibiting progress.
The goal of setups is to make efficient use of your mental capital, create readily-recognizable and repeatable trade criteria across products and market conditions, and finally to make sure you have dry powder (real capital) to trade when profitable setups do materialize! To reduce noise and the impulse to trade every small move, these setups are designed to focus your attention to the highest return on low risk trades.
Look Above and Fail, February 26
At the open, buyers fail to make progress above the key overnight high (ONH) - corresponding to the prior RTH session point of control (Image 2). Not only does buying delta taper, but volume quickly shuts off, indicating a lack of interest at the prices.
The B period offers a retest of the prior auction at the highs, but note the lack of buyer effort, with only a meager 1k contracts added into the offer side. Buyers fail to make any progress into the prior auction after open, offering an excellent retest opportunity short - with stop above the prior highs.
While the day took a long time to unravel into lower levels, the second to final target was achieved at the close. With either 2 or 3 points of risk, the trade offered as much as 30 points shortly after the close - a very high R:R trade.
Image 1. Look Above and Fail markup
Image 2. Context. Prior RTH; and Feb 26 globex and RTH sessions
Closing Notes
Like many things in life and trading, we are not inventing anything new. These are variations building on existing themes and concepts, adapted to my methodology. I refined this toolkit of setups over time to work for me - I encourage you to likewise adapt them according to your system and needs. If you are in the process of developing them, I hope you can glean useful information from these examples.
I share examples regularly, so stay tuned. In the meantime there are many resources online for these and other setups to help with your trading. Thanks for reading, and remember, capital preservation and risk management are key to your success!
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