Factors in Trade Setups
Liquidity plays a major role in any trade setup, as any liquid instruments, such as currency pairs, offer tighter spreads and a faster execution, which makes them great for a short-term strategy. Lower liquidity pairs, on the other hand, or exotic instruments can have wider spreads, slippage, and more erratic price action—factors that must be accounted for when designing your entry and exit rules.
Volatility is something else to consider when setting up a trade. It can possibly be your best ally or your worst enemy, depending on how you manage it. Volatility tells you how much a market typically moves, which affects both your potential reward and your exposure to risk. Tools like the Average True Range (ATR) or Bollinger Bands can help assess volatility levels and fine-tune stop-loss distances and position sizing accordingly.
Rules for position sizing determine the amount of capital you’re risking on a single trade, and it directly impacts your long-term survival in the markets. Whether you use fixed fractional risk (like risking 1% of your account per trade) or volatility-adjusted sizing, having clear rules helps avoid emotional decision-making and protects your account during losing streaks.
Entry rules should be clear, precise, and unambiguous. These rules outline and exactly define the part when you enter a trade and why. Are you buying a pullback into support? Are you selling a breakout of resistance after a volume surge or waiting for confirmation? They remove any guesswork and make your trading decisions more objective and consistent.
When you have finished organizing your criteria and made them clear, trade filters and triggers act as your final checklist. Filters might include factors like time of day (e.g., avoiding low-liquidity hours), economic news releases, or confluence zones where multiple technical signals align. Triggers are specific price actions or indicator readings that confirm it’s time to act—for example, a bullish engulfing candle at a support level, or RSI crossing back above 30 in a reversal setup.
In this course, you’ll learn all about setting up trades and where to get started. You will learn how to choose the right market and timeframes, how to apply the correct indicators and sizing rules, and you’ll also discover how to tailor your setup to different strategies and asset types. In addition, you’ll find out how to avoid the mistake of trading without a plan, based on emotion, and how to evaluate market conditions before placing a trade. Everything you’ll need to get you started.
