Trade setup no.2 – “2:1 TP measured SL” (Swing trading/Scalping)
It’s been a while since I showed you the 2618 trade setup. I am sure you all have read it thoroughly, made good profits from it, and have been waiting for me to show you another trade setup (I hope)?
In this post, I am going to tell you one of my own trade setups, all for free, as part of my gratitude towards your support. This trade setup requires a wealth of knowledge about price structures and price actions. How one would define structures can be quite subjective and, as a result, I won’t go into too much details about them.
Let’s jump right in. Above is a trade idea that I gave to a follower of mine, @Awier18, a few days ago, and I was told he has made profits from it. I thought it would be great if I can share with you the thought process behind such a setup.
Step 1: Identify the trend
There wasn’t any lower low created since the recent bullish movement. This means the bullish momentum is still intact and hence, focus on buying at support.
Step 2: Identify support
There is a structure between $225 – $230 which is the base of the rally-base-rally formation. The base is where I will be interested in buying when price comes back there.
Step 3: Identify TP & set SL accordingly (2:1 TP Measured SL)
Step 3 is the part that is subjective and can be controversial. Personally, I have found this setup quite profitable. I have named this setup as “2:1 TP Measured SL” but perhaps anyone has used it before and has a proper name for it?
First step is to find the nearest major resistance level and set TP at that resistance. In this case, there was a drop-base-drop formation in confluence with the 61.8 retracement which both act as a strong resistance.
Then, stop loss is set to 2:1 r/r ratio per your TP. I know you might ask – “but the next major support/pivot is at $200, shouldn’t you be setting your stop loss below $200?” Well, not really. First, if you set your SL below $200, you will have a bad r/r ratio that’s not even 1 because your position is opened at $230 and your TP is at $259 (Personally, I don’t trade anything below 1.5 r/r ratio). Second, if you were to set your SL right below the base at $225, slight market movement can hit your SL quite easily. You want some leeway while having an ideal r/r ratio.
In addition, have it ever occurred to you that you wanted to take a trade but you didn’t because of the r/r ratio wasn’t great although you knew the likelihood of it hitting your target is high if you were to take the trade? Often, this happens when the trend is strong in that the retracement is minor to give you a good r/r ratio. To save myself from this misery, I have come up with the “2:1 TP Measured SL”.
Certainly, there are other solutions to it such as the inside bar method but my intention is just to provide you with another way to trade.
Please do your own due diligence and backtest this setup before trading it with real money.
If you have found this post useful and would like me to do another education post in the future, make sure you press the LIKE button and share it with others.
Previous 2618 trade setup:
In this post, I am going to tell you one of my own trade setups, all for free, as part of my gratitude towards your support. This trade setup requires a wealth of knowledge about price structures and price actions. How one would define structures can be quite subjective and, as a result, I won’t go into too much details about them.
Let’s jump right in. Above is a trade idea that I gave to a follower of mine, @Awier18, a few days ago, and I was told he has made profits from it. I thought it would be great if I can share with you the thought process behind such a setup.
Step 1: Identify the trend
There wasn’t any lower low created since the recent bullish movement. This means the bullish momentum is still intact and hence, focus on buying at support.
Step 2: Identify support
There is a structure between $225 – $230 which is the base of the rally-base-rally formation. The base is where I will be interested in buying when price comes back there.
Step 3: Identify TP & set SL accordingly (2:1 TP Measured SL)
Step 3 is the part that is subjective and can be controversial. Personally, I have found this setup quite profitable. I have named this setup as “2:1 TP Measured SL” but perhaps anyone has used it before and has a proper name for it?
First step is to find the nearest major resistance level and set TP at that resistance. In this case, there was a drop-base-drop formation in confluence with the 61.8 retracement which both act as a strong resistance.
Then, stop loss is set to 2:1 r/r ratio per your TP. I know you might ask – “but the next major support/pivot is at $200, shouldn’t you be setting your stop loss below $200?” Well, not really. First, if you set your SL below $200, you will have a bad r/r ratio that’s not even 1 because your position is opened at $230 and your TP is at $259 (Personally, I don’t trade anything below 1.5 r/r ratio). Second, if you were to set your SL right below the base at $225, slight market movement can hit your SL quite easily. You want some leeway while having an ideal r/r ratio.
In addition, have it ever occurred to you that you wanted to take a trade but you didn’t because of the r/r ratio wasn’t great although you knew the likelihood of it hitting your target is high if you were to take the trade? Often, this happens when the trend is strong in that the retracement is minor to give you a good r/r ratio. To save myself from this misery, I have come up with the “2:1 TP Measured SL”.
Certainly, there are other solutions to it such as the inside bar method but my intention is just to provide you with another way to trade.
Please do your own due diligence and backtest this setup before trading it with real money.
If you have found this post useful and would like me to do another education post in the future, make sure you press the LIKE button and share it with others.
Previous 2618 trade setup:
