The Trade Setup

While we take a careful approach towards the Money Management and Risk Management that is required for a Trade, it is equally important to have our own Trade Setup so that we do not lose any lagging time. Lagging time here means, we Buy some stock at a level that for the time being not going to appreciate. However, it may have a good potential to move towards our direction. Instead buying today would have given a much more better opportunity than yesterday.

Let us look at the following example.

Tata Motors current rate is Rs.825.50 and the indicators and its price movement suggests that it will reach its Resistance 2 level somewhere at Rs.860. But the price action now at Rs.825.50 is near to the Pivot levels and takes a gestation or a breather for another one day. So timing is important.

To calculate the pivot points, user this URL http://www.pivotpointcalculator.com/ and have your trade setup done accordingly.

Therefore, we need to determine whether the stock is in uptrend or downtrend. The following is a picture from google.com/finance drawn for the purpose of this tutorial. Look at the SMA-100 curve and the price candles on the daily chart.




The Current Rate is Rs.825.50 and the Daily SMA-100 (in transparent red rectangle) is Rs.774.99. It means the current market price is much above the Daily-100 is an indication of Uptrend for the next few days.

However, we want to be sure and firm that the weekly rates also be far below the SMA-100 so that we wait for Buying opportunities. Every time the rate takes a corrective action we buy such quantities exactly as per our Trade Setup rules. Now, let us look at the SMA-100 of weekly chart.



The current price level is 825.50 which is far ahead of the weekly EMA-100 rates and it is a double confirmation that the major trend is high. This setup gives a quick return and more frequently you will be stopped out in profit, as per the trade setup.

The key to big profits is the turnover that you perform during a given period of time, say one year or six months. When you exit your losing position quickly as per 1:3 Risk to Reward Ratio, (stop loss at 2% and profit at 6%) irrespective of the price movement, you will need to be stopped out by the system and "Not you will manually close the Open Trades".