Strategy or Setups

F

FoxKestrel

I'm a relatively new trader that has switiched from FX to Futures recently. For the last 9 months I have spent my time learning the the business. I have read books, watched videos and took courses. The goal for any new trader is to find that strategy that they can consistently execute with success. I can say after 9 months I have not been able to find a strategy that works and wonder if I have wasted good time looking for something that does not exist. One thing that I have found and often hear traders refer to is Setups, traders seem to wait for the market to setup and then execute. They know what they are looking for and can tick boxes as the market is setting up hence the high and low probability setups. Is this not what the game is about? We shall see as I take you through this final or first chapter of my trading career.

I start this thread that I plan to update daily if possible with my final effort to learn to trade, I will be focusing on learning setups not strategies, I trade the ES. I invite experienced traders to contibute with wisdom and assistance if possible.
 
There are numerous approaches to trading the stockmarket. First you have to determine if you are a day trader, swing trader, position trader, scalper, etc. Then, you have the major setups used by most traders which are pullbacks, breakouts, reversals. You Tube is filled with videos and you do not even have to pay for it. Study those approaches and master them. Add Risk Management which in my opinion is the most important of all! If you do not have risk management in your trading, you might as well pack it in! You will not make it and chances pretty good, blow up your account!
 
A setup or rules for entering a trade is part of an overall strategy (assuming your strategy contains rules for the setup, when to exit and position sizing). So focusing on the setup first makes sense in that it should dramatically beat random entry. Once a valid setup is found, exit criteria and position sizing can be worked out.
 
qlai said:
Aren't these terms interchangeable?
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See I'm not sure they are and that is where my confusion may lie. I like Fan27's response where you can class the setup as part of an overall strategy that considers Risk Management, time of day and style of trading. So I may agree that a setup is a segment of the the overall picture however New Traders are told to find a strategy when I think they should be taught to learn to identify setups after all that is how you enter and possibly exit the trade. Also picked up from Fan27's response is that focusing on setups beats random entry. this can quickly give structure as apposed to entering everytime RSI is oversold or the 5 crosses the 10.
 
fan27 said:
A setup or rules for entering a trade is part of an overall strategy (assuming your strategy contains rules for the setup, when to exit and position sizing). So focusing on the setup first makes sense in that it should dramatically beat random entry. Once a valid setup is found, exit criteria and position sizing can be worked out.
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I agree and actually feel that Risk Managment becomes easier or certainly placing a stop loss because you know where you are wrong. i.e one of the setups I'm focusing on is a break from consolidation so it is easy to throw the SL below the range once the market breaks out. Of course you can add other rules to the entry i.e volume, candle patterns etc. The thing is everytime I see the market consolidating I'm on alert because it will break that much is known. To me this is not a strategy it is a setup and the Risk Management that applies to it is different then another setup therefore I could argue that the setup leads the strategy. Ultimately is the strategy not required to execute that partcilaur setup, therefore unique.
 
9 months? You kidding? Took me 7 years to know enough about scalping to be up each year and another 7 years to get good. Day trading is different, you don't have to concentrate as hard to not lose and do well enough to be profitable 50% of the time so long as you reward to risk is like 2 to 1. People do not consider fees are very expensive, ten trades a day is approx. $40 on one lot, this adds up hugely. But where many mess up is not about setups, it is about knowing charting like breathing and this is going to take 10,000 hours of screen time. You can have 10 perfect setups and NONE of should be taken based on what is to the left of now as far as chart patterns that shows high chance of reversing, this take very long time to manually get big enough sample size to see if your idea has any valuability.

And being this your second post, no experienced trader going to offer much quality advise cause most simply don't trust you, you could be a vendor and run out of ideas. You going to have a very long road in front of you to compete with the sharks.
 
FoxKestrel said:
See I'm not sure they are and that is where my confusion may lie. I like Fan27's response where you can class the setup as part of an overall strategy that considers Risk Management, time of day and style of trading. So I may agree that a setup is a segment of the the overall picture however New Traders are told to find a strategy when I think they should be taught to learn to identify setups after all that is how you enter and possibly exit the trade. Also picked up from Fan27's response is that focusing on setups beats random entry. this can quickly give structure as apposed to entering everytime RSI is oversold or the 5 crosses the 10.
More...

The risk management and setup are two different things. Both must be in your trading plan. If you do not control your risk, you will blow up your account and nothing else matters! As for the setups, nothing works 100% of the time. There is a failure rate which you must figure out for the set ups you use! All of it requires study and more study, back test your strategies to make sure it works to some degree atleast!
 
Handle123 said:
9 months? You kidding? Took me 7 years to know enough about scalping to be up each year and another 7 years to get good. Day trading is different, you don't have to concentrate as hard to not lose and do well enough to be profitable 50% of the time so long as you reward to risk is like 2 to 1. People do not consider fees are very expensive, ten trades a day is approx. $40 on one lot, this adds up hugely. But where many mess up is not about setups, it is about knowing charting like breathing and this is going to take 10,000 hours of screen time. You can have 10 perfect setups and NONE of should be taken based on what is to the left of now as far as chart patterns that shows high chance of reversing, this take very long time to manually get big enough sample size to see if your idea has any valuability.

And being this your second post, no experienced trader going to offer much quality advise cause most simply don't trust you, you could be a vendor and run out of ideas. You going to have a very long road in front of you to compete with the sharks.
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Thank you Handle123 I'm definately not trying to get rich or master overnight however I would like to be stepping in the right direction. When I traded FX, I was very much a swing trader however with Futures I just cannot afford to stay in the trade while it plays out. I'm very much a Day Trader now and my focus is on the ES which I have been getting to know over the last few months. Definately agree regarding the importance of milage looking at charts and replay functions on most platforms are good to speed that up. I understand that this could take years to Master but the practice should be focused, i.e I'd like to spend those years trying to master a few setups and learn how the market reacts to them rather than go round in circles. Interesting regarding the trust issue and that is OK, I guess that is more incentive for me to keep updating this thread. I haven't been very good at documenting my trades or experience so this may be a good opportunity to start doing so.
 
smallfil said:
The risk management and setup are two different things. Both must be in your trading plan. If you do not control your risk, you will blow up your account and nothing else matters! As for the setups, nothing works 100% of the time. There is a failure rate which you must figure out for the set ups you use! All of it requires study and more study, back test your strategies to make sure it works to some degree atleast!
More...

Thank you Smallfil I have definately noticed the importance of risk managment particularly the risk to reward element, got to be alive to trade tomorrow and make money when you are right only 40-50% of the time. It is an area that I'm always aware of and constantly try to improve, of course easier said than done however I will keep pushing to get better at it.
 
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