No matter what you trade, each time the market opens, it shows you an opportunity to buy or sell. Out of all opportunities, some trade works well and some give losses. A professional trader always tries to pick the best trade setup from the odds. In technical terms, these kinds of setups are called high probability trade setups.
But what about a novice trader?
A novice trader always faces difficulties to find such trade setups because of the following reasons:
- Instead of looking at price, he looks at indicators to find the trend (without understanding the purpose of it).
- Instead of following a trend, he tries to predict market reversals.
- Instead of proper risk management, he put huge money on a bet because you feel good in that trade.
If you’re doing any of the above, then it will be difficult to identify high probability trading setups.
Now, let us focus on how we can identify a good setup to trade.
As all know, there are two types of trend, uptrend or downtrend. If the price is an uptrend, you should stay long. If the price is a downtrend, you should stay short. So, to have a high probability trade setup, you should understand the concept of buying at low and selling at high or vice versa.
The following steps can help you to identify a good trading setup:
- For highly probable trade, first, identify the support and resistance level. For a better approach, try to find stocks that are near the top/ bottom. At top/ bottom, there are great chances that the stock will face resistance.
- Now, when the stock is near the bottom, check if the stock is giving rejection at such levels. If the stock is giving multiple rejections, then it confirms the support at that level.
- Also, you can use 200 moving averages to confirm the trend.
- You can use volume and price analysis to further confirm the trend.
If anyone finds a stock based on the above steps, there is a great possibility that this kind of trade can be a high probable trade. These kinds of trades can be traded if you have a proper understanding of risk management. At pathfinder trainings, we teach how to trade for maximum profit using pathfinder strategies. Our focus is on risk management and identifying a high probability trade setup.