You Need More Than A Single Setup

By Lawrence

Trading for a living requires a lot of discipline. It also requires a lot of streets smart if you trade discretionarily. One thing that many beginners missed is a basic concept of having multiple setups learned and practiced correctly.

Pure common sense – the edge of any particular trading setup will not be much more than the bias in the next card you get in blackjack, even if you understand and practice card counting perfectly. Thus, in order to handle the complex trading environment everyday, you need to have multiple trading setups in your skill sets to be able to trade successfully during different market conditions.

Many beginners misunderstand that they can master a single setup and then can trade for a living. That is not likely the case. For each specific setup, you need to spend time to understand its reasoning behind, learn the chart pattern available in historical charts, and then practice in real-time or at least using simulation so that you know how to handle the setup in all possible situations.

A set of criteria for a long setup is a unique setup. Do not assume that the short side version of the same set of criteria is the same even though you already gone through the basics of the long side version. The price action behaviour can be different. The response to the changes in market condition is different. You have to master that inverse setup separately, otherwise such assumption will get you slaughtered literally in real-time trading.

By learning one setup at a time, you will eventually master enough setups that you can use to trade for a living. It is not something that can be accomplished by simply reading a book. I have not seen any one successfully learned to ride a bicycle by reading a book. Its not a matter of mental capability, its more an issue of discipline and focusness to practice, and eventually master the art of trading.

Having a good mentor helps. Having good trading buddies to learn at the same time also helps.

For mechanical traders, the need of multiple setups is exactly the same. If you assume that you can discover a single pattern that will enable you to trade for a living, you are making the same mistake that a beginner in discretionary trading does. Great trading patterns that last do not give you an edge much greater than professional card counters on a blackjack table. You need to have multiple setups that you can integrate together such that your models can handle the markets in various trading conditions without too much optimization or special rules. That ensure the long lasting lifetime for your setups and your trading career.

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