21 profitable stock trading setups and the optimal conditions to trade them

Most full-time traders have a basket of “goto” setups that they trade repeatedly. Some do so mindlessly, irrespective of market conditions. You can make money this way, but you will not become wealthy.

The best traders optimize their trading by deploying the right setup for the right market. For instance, a “trading range” setup is highly profitable in choppy, rangebound markets. Just don’t expect it to make you money in a parabolic momentum market.

Here are some of my favorite setups and the best conditions to trade that setup:

  1. Trend pullback: trending markets that successfully tag key moving average support
  2. Bottoming formation: downtrending markets forming a base
  3. Rubber band short: parabolic markets nearing resistance showing signs of weakening
  4. Rubber band bounce: parabolic downtrending markets near major support levels
  5. RSI divergence shorts: market near highs but showing weakening overall breadth
  6. RSI divergence longs: markets near lows but showing strengthening overall breadth
  7. Breakouts: earnings season in an up trending market
  8. Breakout pullbacks: trending and rangebound markets, avoid downtrending markets
  9. Breakdown shorts: downtrending, rangebound and stalling trending markets
  10. Trading range bounce: rangebound and trending markets
  11. Trading range short: rangebound and downtrending markets.
  12. Breakout failure: Downtrending markets that are bouncing, or stalling at highs.
  13. Breakdown failure: momentum markets
  14. Remounts: any market
  15. Earnings Breakouts: Any market
  16. Head and shoulders short: Extending markets showing negative volume patterns
  17. Double Top short: Extended markets showing negative volume patterns
  18. Earnings Breakdowns: Downtrending markets
  19. Moving average bounce: any market for small bounces, trending markets for sustained bounces
  20. Pre (anticipatory) breakouts: Trending markets
  21. Dead cat bounce: down trending markets, rangebound markets
All of these setups will allow you to keep up with or slightly “beat the market”. However, if you want to make serious money in the trading game you must deploy these setups under optimal market conditions.
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Image courtesy of scottchan at FreeDigitalPhotos.net

9 thoughts on “21 profitable stock trading setups and the optimal conditions to trade them

Add yours

  1. Hi Paul. I'd like to thank you for your webinar last week. Very nice. This is great info. I really like your tone and style, very professional and grounded. Perhaps later this year I'll buy in on one of your services. I enjoy your little tidbits of knowledge you release in tweets. Thank you for your wisdom <--!!. Keep up the great teaching moments.


  2. I would like to know them all. It’s hard to adjust, or maybe readjust, your mindset when you grow up not knowing anything about the markets and how to play them, to studying and learning how to trade. It’s not an overnight process for an old timer.


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