To tackle the markets, we don’t need to make things complicated. This article will show you the three simple trading setups that every trader needs to know to improve their trading. Together we will take a look at the three trading setups: ‘Break, Retest & Continuation’, ‘Extension’, and ‘Swing’. We will go over the three of them and how we can make use of them in our trading.
Break, Retest & Continuation
Break, Retest & Continuation setups, also known as BRC. It’s a strategy that requires a market to break either above or below the Key Level of Importance, as referred to a Break, then a retest on the same level, which means the price comes back down or comes back up to the Level, and finally a continuation: The price goes in to its original direction.
How should we spot a BRC trade then? First we want a series of higher lows and higher highs being formed in an uptrend; Or lower highs and lower lows being formed in a downtrend. During a market’s expansion, we will capture the continuation, instead of chasing the trend in the first place. We want to see good structure around the Level as well: We should see a price reaction around the Level, which indicates confluence on that level that we are trading on.
Extension setups, also known as Mean reversion trade. It’s a strategy that is looking from a strong macro trend to trade on. Our RTD - Real-Time Trend Detection can give you a good glimpse on a very strong Global trend.
How should we spot an Extension trade then? We would like to look for a strong Macro trend, to which it will help us to find a Key Level of Importance for mean reversion. Then we are looking for short term momentum against that macro trend. Once we see a quick short momentum, what we are looking for is a market range for a fakeout, which will be pushed in a reverse direction and maintain the macro direction.
For Swing setups, swing trade could be either one of the Extension setups or the BRC setups. The key characteristic here is that swing setups take longer time to run, where we can ‘swing the bat’ in line with the overall trend.
In Swing trades, we are looking for a point where we can swing, for a reversal or a continuation, with our stop-loss in a position in which we know the Overall trend is invalidated. Unlike the two other trades, we are specifically looking for long-term macro trends which we are identifying as a Key Level. In turn, these trades can take up to a few days, or to weeks.