How To Determine A Good Trade Setup

Trading is full of possibilities. The probability of winning a trade vs. losing a trade is always 50/50.


What if you could up the probability of winning your trade to 70/30? How would that look? How would you set that up? How would you determine that trade is has the probability of winning 70% of the time?


It all depends on your trading setup and the rules and details. Located below is a good trade setup that I win 70% of the time.


A good trade is based on a few key components:


First, a good trade is based on trend. You have to determine if the trade will be profitable in a down trend or uptrend.


Second, a good trade is based on structure. In the trade above, price rejected a resistance area and pushed down to the next price point.


Lastly, price action determines the entry. Price created a beautiful reversal doji and a confirming bearish candle.


A great book that details these all three well is How To Read A Price Chart. Click here to access.


These three components help create a good trade entry and these entries will be known as a textbook entry because it's a trade that can be taken time and time again and never really change much over the course of time.


Rules

Every trade setup has rules you must use to enter. Those rules are determined by you. For example, your rules may be built on trading against the trend. You may also use rules based on indicators vs price action trading. You may only trade 2:1 risk to reward trade.


Your rules are personal and should be backtested thoroughly before live trading. Every person trades different rules and there is no need for comparison. Backtest, test your rules, and add them to your trade setup.


Profitabiity

A good trade is also determined by it's profitability overtime. If it hits profit repeatedly and gives you a good win percentage over the course of your trading career, it is determined to be a good trade setup.


Conclusion

The three things that make up a good trade are price action, structure, and trend make for good trading components. What determines a good trade setup are your personal trading rules and what determines if it will win repeatedly, is your win/loss ratio.


Comment down below if you have a good trade setup or if you need more help creating one.


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