Three Day Setups (HOW / LOW)
Anticipating the market is gambling. Being patient and reacting only when the market gives the signal is speculating.
The most important thing to understand is that most of these setups are "pump and dumps" or "dump and pumps."
They pump, pump, pump, move sideways and dip a little, a smaller pump, then a dump. The dump can go straight down, fast.
The pump up can often be hard to trade the first day — price action can be choppy, back-and-forth, a slow grinding auction. Other times you're forced to "chase the move."
One of the reasons behind this is that you are being forced to start buying or selling on Day 1 or Day 2 more and more higher, depending on the session and the price area you're trading in.
If you're selling, you may be selling in a market that is still in the "pumping" phase, or in the "frontside" of the move. So if you're selling, your success may have limited upside until the market is in the "backside," or has finished going up.
The same applies for a "Dump and Pump," but in the opposite direction.
Pump and Dump
- ·Monday → is the "pump up day"
- ·Tuesday → breaks down and closes BELOW the open. This is what I call the First Red Day. Note also this is an "inside day."
- ·Wednesday → has a well-defined rectangular consolidation. We want a sell setup at the HOD in Asia, London or New York.
- ·Some BTS will culminate in a three-session blowoff (Asia, London, New York) for very large moves.
Dump and Pump
These are just examples of the basic three day setups for selling and buying.
Depending on the session you trade (Asia, London or New York), your ability to be positioned in these trades will vary.
Maybe you trade the Asian session, but the market doesn't set up for a sell opportunity until the London session. It doesn't matter — there will be plenty of trades in your session.
Sometimes a big move happens in Asia on a particular instrument, sometimes in London, and sometimes in New York.
Stacey's thinking flowchart
I've attached a basic flowchart of my thinking process. When the week begins, I know there will most likely be a Best Trade Setup. It's important to step back and let the market set up.
We often rush on a Monday ready to get into the market. The flowchart allows me to focus on the BTS in my session. I primarily focus on New York. If I get a signal day, however — an Inside Day close or a First Red Day for example — I'll look at how Asia is setting up, and also draw my levels on the chart before going to sleep.
There may be a BTS in Asia. I may wake up in the morning to see an FRD setup that's a perfect three-session setup for a sell at the New York open, and WITH NO SCHEDULED NEWS.
I don't know what's going to happen, but I don't stay up all night because I think there could be a trade. If I'm asleep and it moves in the London session, I'll look for the LHF in New York. (Low Hanging Fruit).
Important
If I can emphasize one important thing, it's that a larger consolidation is built on these three-day cycles. Often three days will form a large "rectangle." It may not look that way at first, but there will be many "buy low" or "sell high" opportunities that in hindsight will look obvious.
My objective with sharing my Playbook Best Trade Setups, with you, is that you, depending on your location and time for trading, you will start to see these repeatable scalable trading setups in live time. Then start to consistently profit from them, and grow your trading account.