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Strong Trade Setups Gauge


Those of you who have been following us for a while, know that we always emphasize on taking the strong and high odd trade setups and ignoring the weak and questionable ones. The reason is clear. There is a higher probability that strong and high odd trade setups make money for us.

Now the question is what is a strong trade setup from our point of view? What are the differences of a strong and high odd trade setup with a weak and bad trade setup?

So far, we have been trying to describe the strong trade setups and compare them with the weak ones through different articles and examples. A picture is worth a thousand words. If you refer to LuckScout archive and read the articles, you will see too many examples of strong and weak trade setups that we reported. In one of the articles, I tried to collect some of the strongest trade setups that I could see on some of the currency pairs daily chartsWhat Are the Strongest Candlestick Patterns?

Later on, I had a test for you to make you see if you can distinguish the strong setups from the weak ones here: What Do I Mean By “Strong Trade Setup”?

And the test result was posted here: Our August 11th Test Result

Those examples and practices were good, but the problem was that the trade setups we exampled and practised, were related to the past, and they had not been reported by us right when they formed. It is very easy to check the back data on the charts, and locate the strong setups that moved the price accordingly. That doesn’t mean that a trader is able to locate the strong trade setups right when they form on the charts, to enter the markets on time. Those trade setups are good examples, but here we need some “live” examples that show how the strong trade setups form lively, and whether we are able to locate them on time or not.

Fortunately, we were lucky enough to report two literally “strong” trade setups (a short and a long trade setup) when they formed on the charts. And, fortunately those trade setups worked very well and made the price move accordingly, before our eyes. This is what we needed to compare all the other trade setups we located. Several days later, when I was explaining about the Hammer Candlestick formed on USD/CAD daily chart, I inadvertently considered the strength of those two trade setups as 100, and used it to gauge the strength of the USD/CAD Hammer and long trade setup that was just formed. Then, I came to this conclusion that it was exactly what I was looking for, to give you a clue about the strength of each of the trade setups that I reported. And this is what we will do in future too.

What Are Those Strong Trade Setups?

If you want to keep on following us on LuckScout.com, you need to study those two strong trade setups, and learn why they were strong. It helps you locate the similar strong trade setups that will form in future. It also helps you understand what we mean when we compare a newly formed trade setup’s strength with those setups.

1. The first setup, was a short trade setup formed on GBP/CAD daily chart: Typical Example of a Strong Dark Cloud Cover Pattern Formed on GBP/CAD Daily Chart

It was such a strong short trade setup that was reported on LuckScout right when it formed. It made the GBP/CAD price go down for over 870 pipsHow Is Our GBP/CAD Short Position Going?

2. The second setup was a long position formed on AUD/JPY daily chart: Strong Dragonfly Doji or Pin Bar Candlestick on AUD/JPY Daily Chart

That was also such a strong trade setup that moved the AUD/JPY price for over 400 pips: Our AUD/JPY Dragonfly Doji Is Still Flying

Please read all the articles related to these two trade setups. It will become much easier for you to follow us here on LuckScout, and understand what we mean when we say “strong trade setup.”

I gave a 100 score to the strength of these two trade setups. We will use this to “gauge” the strength of the other trade setups we will locate in future. For example when we say that the USD/CAD long trade setup’s strength is 70 to 80 compared to the GBD/CAD and AUD/JPY trade setups, it means 70-80% is possible that USD/CAD goes up strongly the way AUD/JPY did. 20-30% is possible that USD/CAD goes down, or goes up but not as strong as what AUD/JPY did.

When the strength of a trade setup is 100, does it mean that it will move toward our take profit order very strongly, and it will never go against us?

Absolutely not. When we “gauge” a trade setup, it is based on nothing but what is already formed on the chart. What will happen in future, and whether our position will hit the stop loss or target is what we never know. Sometimes even the strongest trade setups hit the stop loss. “Trading” is all about taking risks. You take a risk when you enter the market. The difference is that it can have a lower risk when you enter the market based on a strong setup, and a higher risk when you enter based on a weak trade setup. What you should never forget is that you must always limit your risk through setting a reasonable stop loss.

Please use the below form to submit a comment only if you have any questions about the GBD/CAD and AUD/JPY trade setups, and the way we use them to “gauge” the other setups. Off-topic comments and questions will be deleted. Thank you for your cooperation.

Note:

1. After publishing the above article on Sep 13, 2014, we wrote a series of articles and “gauged” some of the sample strong trade setups, to help our followers understand how to gauge the trade setups properly. To complete your knowledge and experience in locating and gauging the strong trade setups, read those articles carefully:

  1. Learn to Gauge the Trade Setups
  2. Forex Trading Couldn’t Be Easier
  3. How to Choose a Strong Trade Setup
  4. When a Butterfly Pattern Supports a Candlestick Pattern
  5. To Trade or Not to Trade, That Is the Question
  6. Make Your First $100,000 Trading Forex
  7. Strong Doji on a Strong Bull Market
  8. Typical and Atypical Trade Setups
  9. Candlestick’s Shadow versus Candlestick’s Body
  10. How Chart and Candlestick Patterns Support Each Other
  11. When a Trade Setup Confirms Another Trade Setup
  12. What Have You Learned So Far?
  13. A Reversal Signal that Is The Beginning of a Continuation
  14. The Trade Setups that Have to be Ignored

2. Then we published another article that outlines all the important points that we need to watch for, on every trade: Our Trading System Checklist

3. As the first item of our check list is locating of a too strong candlestick pattern, I started writing a separate article about each candlestick pattern, and the way it has to form to be known as a “too strong” pattern:

  1. Features of a Strong Dark Cloud Cover Candlestick Pattern
  2. Features of a Strong Bearish Engulfing Candlestick Pattern
  3. Analysis Of Strong Piercing Line And Bullish Engulfing Candlestick Patterns

4. After the above articles, I introduced another strategy to trade the long time frames’ (daily, weekly and monthly) setups on the short time frames like 4hrs and 1hr. That is just a solution for those who want to enter the market with a smaller stop loss, and those who want to have more trading opportunities:

  1. Trade The Daily and Weekly Candlesticks’ Signals On The Short Time Frames
  2. Wait Sufficiently Trade Efficiently

However, if you like to follow the above strategy and use the shorter time frames, you have to be aware of the risks and challenges that referring to the shorter time frames has. My personal recommendation to you is that you just stick to the long time frames (daily, weekly and monthly), and trade the setups that can be found on them. It will have much better results in long term, higher number of successful trades, less challenges and problems.

5. I wrote two other articles on holding the positions and taking the new positions when a new strong trade setup forms:

  1. How Long Is A Strong Trade Setup Valid?
  2. How To Maximize Your Profit As A Novice Trader


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56 thoughts on “Strong Trade Setups Gauge
  1. Hi all,

    I will publish a separate post focused on the currently formed/forming trade setups on the daily and weekly time frames. Here on this page, please kindly comment only about the topic I discussed above.

    Thank you,
    Chris

  2. wan kamal

    I’ve been following LuckScout for about 2 months and its very help full for a beginner trader like me. My question is, can I use your trading system on lower time frame for scalping?

    • Hi Wan, You can use it on the shorter time frames, but you should note that shorter time frames have a lot of noise and their trade setups are not that reliable.

  3. Don

    Chris,

    I have spent the last 2 weeks here on your site reading and following your advice (poorly at the moment, really dealing with the psychology of trading is hard for me). I have found it very helpful and wanted to thank you for it. Lot of good free advice. I have also been following a guy on youtube under the handle Forex Reviews named Timone down in Australia and it seems he and you have much in common. He also goes into the mind games one has in trading as you have. He recently came up with a pay for program, I wouldn’t buy it, as most of it he has given away through the videos and I have wasted to much money in the past. If its good, its free, cause folks would enjoy watching you make money like they do.

    Again, thanks a bunch and look forward to reading more of your articles.

    Regards,
    Don

    • Hi Don, Thank you too. I am glad you like our work here on LuckScout.

    • ash

      Hi Don, i too have come across Forex Reviews before i found LuckScout and i can tell you that you are Now in the right place. You are right you dont need a paid course. The teaching here in all aspects (psychology and technical) is much more clear and straightforward – just my personal experience from a 3 year learning curve. 🙂

  4. FX Trader

    Hi Chris,

    Thank you so much for all your effort.

    Have a nice weekend!

  5. agyusant

    Chris,

    I have spent 9 years trading forex and not profitable. But since i followed your articles i became optimistic that i will be profitable like you.

    Now i’m practicing your methods.

    Your articles help me a lot.

    Thank you for helping me.

    May God bless you!

    • Hi Agyusant, You are welcome. I am sure you can do it. The fact the you have not given up after 9 years, means you are such a strong person. You can do it. You are almost there.

  6. Mat Le

    Since i came across to LuckScout website i never look back.. i keep on reading again and again your articles.. this is what ive been looking for.. simple trading method.. i really want to master it.. ive been trading for 1 year++ now and being profitable only at the beginning (maybe its a beginner luck :)).. after that i stop for a while and looking for other strategy until i found your website.. thank you for your effort chris teaching us for free.. may god bless n reward you.. regards..

  7. ash

    Chris, in the article: ” What Are the Strongest Candlestick Patterns?”. Are all the setups shown in that article considered to be ‘strong’ setups with a gauge of 100 ? Thx

    • Ash, All of them are strong, but many of them are not 100.

  8. Peter Wagner

    Hi Chris
    The gauge idea is great – it will help to clear perceptions by bringing a comparison or grading in ‘what is a strong set up’ for us. Thank you for your time, effort, ideas and experience.

  9. Peter Wagner

    Hi Chris
    As an idea – perhaps – as a learning game test – we could go through the chart shot set-ups in your article “what do I mean by a strong setup” and grade each chart set up – one by one and state why in say a maximum of 3 points, – and so check our understanding progress against your ‘after results’ grading of that setup –
    Perhaps they are all at 100 though and it wouldn’t work

    • Hi Peter, That is a good idea. I will arrange for it. You can start grading the charts.

      No, they are not all 100. So that will be a good practice for you to gauge each of them and compare your result with mine.

  10. Rajagopal

    Chris,
    Based on last Sunday comments by you about CAD/JPY,GBP/CHF & EURO/GBP, I took short, long & short respectively after reviewing the daily & weekly charts for these pairs.
    All of them were very volatile for a day and eventually hit the stop loss which had become positive at some point. I made about 10$ profit each on GBP/CHF & EURO/GBP. This is because I activated trailing stop. For CAD/JPY I had only fixed a SL at 97.155 and didnot activate trailing stop. It is still surviving but at loss.
    However, the other two resulted in 200$ combined loss when I took repeat position on them thinking it will be ok because the daily & weekly charts did not change. But they are bearish today due to the $ news yesterday.
    Any comments??

    • Hi Rajagopal, I did not have any comment on CAD/JPY last Sunday. I will be thankful if you refer me to that page. Regarding the GBP/CHF and EUR/GBP trade setups, I merely analysed the candlestick patterns formed on the charts and mentioned the negative and positive points based on what we could see on the charts at the time. What happens after a trade setup is something we never know. All we can do is that we consider each trade setup risk, and make a decision to enter or stay away from the market.

  11. Rajagopal

    Chris,
    I perfectly understand that. It appears to me that probability of profit is is only about 30% no matter how promising the set up is. Trailing stop always triggers to limit the profit and of course without stop loss we get destroyed.
    I target 100$ per trading day. Yesterday I lost 400$.

    • Hi Rajagopal,

      I will re-analyze GBP/CHF and EUR/GBP today.

      I do not use trailing stop because I believe we should give enough room for the price fluctuation. In many cases, the trailing stop loss closes your position while you could make a lot more profit.

      The last thing for now, is that some of the LuckScout followers are doing good and have become profitable after following our articles. You can ask them for advice. It can be a big help.

      Wish you the best.

  12. Singh

    There seems like strong setup on AUD/JPY weekly chart ( you might have seen it already). Right now price is up and one can get good price if decide to short.

    What are your thoughts

  13. Alejandro O, Bastida

    My speed in understanding of your trading guides is slower than a snail speed because i have so limited time to read your articles but again thank you so much of your free guides, no one on this planet except you who give it freely….

  14. ash

    hi Chris, i have a question regarding strength of bollinger band breakout. Which is stronger (if everything else is the same with the setup): [Setup 1] 100 pips candle, 30 pips BB breakout, or [Setup 2] 70 pips candle, 50 pips BB breakout. I ask because when you say ‘strong BB breakout’ i am not sure if you mean the actual pip value of the breakout (30 pips or 50 pips, above) or if you mean the % breakout (30% or ~71%, above). Thank you !

    • Hi Ash. The second setup has a stronger BB breakout apparently, BUT the first one can be a stronger “trade setup” overall.

  15. ash

    Hi Chris, Sorry i mean:
    [Setup 1] 100 pips candle with 60 pips breakout (60% breakout). or
    [Setup 2] 70 pips candle with 50 pips breakout (71% breakout)
    Which one has a ‘stronger’ BB breakout ? thank you

    • The second breakout looks stronger, but the first one is a stronger trade setup.

      • ash

        Thank you Chris, much appreciated.

  16. Henry Tan

    Hi, Chris

    I am from Singapore. Happening to look through article and found quite useful.

    As I have been trading forex for the last 5 years learning from few mentors and spending thousand of dollars, and have seen return.

    Reading your article had help alot and clear my understanding as the mentors are unable to assist in my queries.

    Keep your articles coming for those traders who are in need of answers.

    Thanks again for your wonderful articles.

    Henry

    • Hi Henry,

      Thank you for your comment. I am glad to have you here on LuckScout. Welcome! 🙂

  17. Parson

    Hi Chris
    Gold on friday 7,2014 closed with a too strong bullish candlestick,however the candlestick itself didn’t break out Bollinger band strongly. Also it just broke out the strong support 1180!!. Would you still consider it as a long trade setup?
    Thanks
    Parson

    • Hi Parson,

      The Hammer on the daily chart has to be confirmed. I am going to analyze it today.

  18. San

    Hi Chris,
    I have been reading about forex trading for past2 months or so. I have studied all the basics and understand technicals.
    My question is, to find out these “strong trade setups” I need to be monitoring the charts on a very regular basis. I cannot monitor the charts all the time. So whats the best way to enter for someone who cannot monitor these charts like a hawk.
    Also whats the best exit strategy? should I use Fibonacci as my exit strategy?

    • Hi San,

      If you follow the daily, weekly and monthly charts, you should only check the chart once every day when the daily candlestick is closed.

      This is what we do to exit a trade:
      https://www.luckscout.com/how-long-is-a-strong-trade-setup-valid/

      • san

        Thanks Chris. I like your trading style with minimal indicators. I read this article
        This is what we do to exit a trade:
        https://www.luckscout.com/how-long-is-a-strong-trade-setup-valid/
        You said something like
        “This is also a good answer to those traders who ask how long we should hold a position.

        As you know, I take two positions when a too strong trade setup forms. Both positions have the same stop loss, but one of them has a 5 x SL target and the other one has no target. When the first position hits the target, I move the second position’s stop loss to breakeven and hold it as long as signs of exhaustion have not appeared yet, or a strong reversal trade setup has not formed.

        So your Risk:Reward is 1:5? Thats very bold. What if it reverses and hits the stop loss.

        • Hi San,

          You are welcome.

          As I take the too strong setups only, I re-enter if my stop loss get triggered.

  19. Hi Chris,

    Is there something wrong with the website? I can’t access the home page since yesterday. I haven’t been receiving the daily posts as well.

    Regards

    • Tafadzwa,

      Yes, there were some technical issues related to the most recent changes. It seems it is resolved.

  20. Alright.

    Thank You.

  21. Wow,this is a crystal clear point of view when to take a position,thanks Chris

  22. Sir can you help me to write a trading plan based on fxkey methods. can I use fxkey methods for stocks also?. Am trading Indian stocks also.

    • Panneer,

      We use candlesticks and Bollinger Bands to trade. This system can be used to trade any market, including stocks.

  23. Thank you Chris for these summarizing articles.

    I can collect many information in each article, it takes some times for me to read and taking notes about important aspects of your trading system.

  24. These are great articles! I’ve gone all over your website and I’m still confused about “gauging”. What are the parameters and the weight of the parameters of a trade setup to add up to 70%, 80%, 95%, etc? I have read several articles talking about it, about a checklist consisting of basically 4 simply understood steps (is this it?).
    Thanks for your reply in advance.

    • Larry,

      There is no exact and defined parameter. This is not based on a formula.

  25. Thanks Chris,

    I can’t imagine that you are able to handle our questions I don,t know whether you are able to have time to sleep because to me it looks too much for you! may be we are a pain in the neck?

    You have written a lot of articles some of which I never imagined they exist I really have to read a lot on a daily basis to catch up with you.

    I,m basically still confused on gauging system, I have not really understood it! may be i have to re-read as more than once!!!

    • Nics,

      Thank you.

      I work too fast. Replying comments doesn’t take too much time from me.

  26. Thank you again Chris. I love reading and re-reading these articles.

  27. Hello Chris, i wanted to know what if the 3rd candle happens to be the one that is engulfing from the two? how should i treat that whether its a long or short trade setup. Should i consider it strong?

  28. A group of important articles summarized here in this article … thanks for your effort teaching us strong trade setup … who you remind me of is a professor in my university who was always thinking how to improve our knowledge and skills … anyway,I love your articles , thanks


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