A trading setup is a set of conditions that come together in a particular way, indicating a probability of one thing happening over another. It’s like a weather event that happens when certain conditions come together in the atmosphere. First, we must define the conditions within price flow so that we can recognize them coming together and follow their process. The conditions we will use will be 2 of the market structure components that make up a swing. In this video, you will learn about the gap impulse and the shelf and how we can lean on it after certain conditions are met.
In part 4 of “Design Your Own trading Methods”, we design a couple of setups based on what we have learned in the previous videos about the process of a swing cycle and its components. We will work with a range setup or a wash & rinse setup that has a powerful impulse and is in the pressure cooker zone or the clean air zone of a swing cycle. In the video, I show how to understand and identify the zones and the setups. Any setup needs your full understanding of it, so practice by studying hundreds of them.
Design Your Own trading part 1 was about understanding the swing cycle and its process. Part 2 was learning some definitions and making some distinctions so we can map. In Part 3 we explore the 3 basic ways there are to trade, range trading, breakout trading, and swing trading. When talking about methods or setups, it’s important to approach the subject in an effective manner. No setup works in a vacuum and no setup has statistical probabilities. The only edge you have is your understanding of the market at the time of the setup. This understanding comes from learning the language of price and being able to map your market and the personal experience you develop from this frame of reference.
In Design Your Own Trading Methods: Part 1, we developed an understanding of the different phases of a swing cycle and how it moves in contraction/expansion so we can develop tactics for various parts of the cycle. In this next step, I go over some of the principles of price flow and define the components, and process of a swing so we have an objective frame of reference. With just this step of mapping, you never have to ask anybody what they think about a particular market, you just look for yourself and see what is true.
This is the first part of a series on how to design your own trading methods. These methods can be from what you have observed in price flow, or they can be methods you have learned and want to adapt to your needs the way you see. It’s beneficial for us to participate in the authorship of the trading methods we use, and to make them ours.
Whatever we design will have to adhere to the principles of price flow. For example, everything moves in contraction/expansion and all market structure is a derivative of gaps and swings. From this observation, we can start to build on solid foundations and come up with numerous methods.
In this video, I want us to get a solid understanding of how price moves in a swing cycle. A swing moves in process and each part of the process has its own components and characteristics. If we understand this, we can design methods and tactics for various parts of that cycle.