As a day trader your going to have to learn how to identify setups. Perfect setups are moves that happen over and over again that you are familiar with that yield gains more than losses. A perfect setup doesn’t mean it will turn into a winner all the time. Bare with me as I explain the meat of this article.
Not all setups are equal. If you have watched the gurus videos and you learned a setup like a multi day breakout, the probability of it doing the same is not always the same. Setups have many rules. The more rules the better. Although there are downsides to this which I will explain.
So I get it, you wait all day patiently to find a good setup, you see the setup the guru talks about, your waiting for the alert from the guru that he buys, what do you do? You jump in. The guru says, no, that’s not a setup I would take. Your thinking to yourself as you scratch your head. “What ??? How come???” Well the reality is, the probability of the setup following through depends on not only the price action of the general idea of the setup but the actual price action of how the stock actually setup. This is the main reason why trading is very hard to teach. Average traders, who even know bout this, still take those trades because they run out of patience and they are excited for the move. The profits. Well as I’m sure you know, what is typically the outcome? Yup a loss. Then hours or minutes later, the stock moves without you. Well what is that? What happened ? Guru tells you, you were in to early. Reality? The market makers manipulated the price, took your shares and ran without you. This happens all the time.
Now this is not to say you can profit from learning from others. You just have to understand there is more then just the setup itself. How the price action acts towards the setup that is happening and what it does before it sets up, gives you conviction of what it can possibly do. At the end of the day, you have to let your winners run a bit. You have to cut your losses short. Trading isn’t easy but if done right, can make you a lot of money perhaps.