master_trader_426x300Rather than review of the the markets and stocks of interest today. You can read prior letters for that.  I've prepared a Master Trader lesson that will serve you for a lifetime. I hope you enjoy it. I know you will profit from it.

The markets performed as expected yesterday. Read my prior letter for that overview as to what was expected and why.

Today at 2:00 is the anticipated Fed announcement that is expected to be a non-event; meaning no change.

If there is – a raise – then look out below. That is unlikely – I think, but we have to stay objective to all possibilities.

With the Fed tomorrow and typical trading day that occurs. Take  your morning planned trades. Then sit on the sidelines until after the announcement and gyrations are over. Read on to master this trade setup.

I am often asked, what is your favorite or best trading setup?

It's a trading setup that has multiple parts that come together to provide that “best trading setup.” That is what makes it the best.

There are many trading patterns that are high odds and many of them include most of the parts of the one I will share.

This setup is one of the best that I will take every time.

What makes a great trade setup?

  • The setup has multiple times frames aligned
  • The setup is with the trend or has had a climactic extension
  • The setup entry for longs is at price support and resistance for shorts
  • The move has already started, except for the climactic extension type
  • The setup clearly has room to continue into a “Void”
  • The setup has had a higher than average volume increase
  • The setup has had some type of failure pattern

Master Trader Setup

8-16-2016 Master Trader Setup

The above chart had everything mentioned above coming together. While we are viewing this together with weekly and daily time frames for a swing trade bias. An intra-day day trader could use a 60-minute and 5-minute time frame combo.

The trading concepts mentioned for the setup are universal. You simply need to choose what time frames you want to apply them to. Let’s review.

The weekly time frame was in an uptrend of higher highs (HH) and higher lows (HL). When prices moved to a new high within that uptrend, it failed to continue and prices broke below the prior HL violating the uptrend.

At that point, the simple concept of support becomes resistance applies.

When prices retest that area you should be thinking, here comes my short setup.

Now move to the lower time frame for that to form.

The above being said, should prices cut through that resistance and they move back to the old highs. The anticipated setup has been negated and it’s time to move on to another setup. This one did not set up per our plan.

We could have stayed with the weekly time frame; however, moving to a lower time frame provides more detail of the price action.

On the daily time frame we can see the sharp drop on well above average volume (+ volume).

Prices typically retrace after that and that is what we are hoping for. Prices moved back to the resistance (supply area, red line) where the sellers are.

That is where those that were long were shocked by the big drop lower and want to get out those longs.

A Master Trader will Notice the Potent Reversal at the Supply Area

This alone provides a setup for entering short and that can be done, but know that at times this high can be slightly overcome and then the drop follows.

Point is not to place a stop-loss exactly above that high; rather, give a bit more room for a wiggle.

In the example shown, there was a lower high retest and this is as close to sure money as there is with everything else mentioned aligned too.

You see both action points for entries for this setup. From either, you are in the trade and must manage it according to your trading plan.

In addition, while I have shown this as a swing trade, the day trader could use the setup as a bias for their trades in the time frame of their choosing.

There were quite a few days moving lower that the day trader could have nailed this on the intra-day retracements.

This is an insight into what I have taught other to become a master at the profession of technical trading.

There isn’t one perfect trading setup that works every time.

However, when multiple trading concepts are aligned as explained, the odds are overwhelmingly on your side. That is what a Master Trader requires.

All the best,

Greg Capra

Founder of The Pristine Method of Trading

Follow me on Twitter and StockTwits to get real-time updates:

Twitter: @GregCapra
Stocktwits: @Greg_Capra

Friend me on Facebook