Wednesday, 10 February 2010

Setups or Upsets

One of the important things that Kiki needed to learn was how to create her setups. I must admit that I did cheat a little in giving her a head start with one or two setups as it brought her to SIM profitability in just a few weeks - after all, she is my daughter. Kiki said not to forget to mentioned that she also has immediate feedback good or bad on her trades which really helps her.

So, how do you go about it and why?

The "why" may be obvious but not quite. If you learn to do the same thing over and over again you get pretty good at it and can do it without thinking. Trading is a little more challenging as no two trades are exactly alike but I try to find enough things in common that I can create a setup. This way, I only have to look for the commonalities in the heat of battle. I look at many, many trades until I see a pattern that looks promising. I then create a setup. I then backtest that setup for winrate to my first scale point. But the commonalities may not all be quite as you may imagine.

The screenshot above is one of my setups. It's a version of the setup I showed the other day using delta divergence. Most of my setups involve some kind of pullback. I do that as it gives me a lower risk and a tighter stop. This one meets that criteria.
  1. the trend is down - 45 CCI was less than Zero for many bars
  2. swing made a new high
  3. smoothed CVD is red
  4. market pulled back until it hit resistance - 33 EMA and/or 99EMA is resistance for me.
  5. range bar closes down
That's it. I have a new setup that I can execute trades against. I used a high skill level to develop the setup but can operate at my usual lower skill level during the day to execute it.

Then there are the exits and trade management which are equivalents of setups, but a lot more work to develop.


  1. Can you provide an example of what the 'foot print' is in Market Delta? Thanks.

  2. Hey, this is unrelated to this post.. But I've been trying to use your set up while trading the Russell 2k futures which are the TF. And I was wondering how you figure out the correct amount to use for the range bars? I have been using a .9 range bar but it was just kind of a guess. Any insight on how to pick the correct range would be awesome.. Thanks!

  3. I have been following your blog with great interest. Could you tell me what role did intrabar bid/ask volume (footprint) knowledge play in Kiki being consistently profitable?

    When your time permits, would you share your thoughts or examples of how you use the intrabar bid/ask for aggressive entries? Thanks