Trade Setups, Stops, and Profit TargetsTrade Setups was the topic of the webinar this morning when I explained the trade setups that are used in the live trading room for trading futures and binary options using the THD proprietary strategy. This is a great refresher course for those that have the indicators and a great overview for those that are interested in purchasing the subscriptions.

In the video, I actually explain the setups for both trend and counter trend trading any market.

Trend Trade Setups

  • Identify the trend of the higher timeframe
  • On the lower timeframe, the ATR must match the color of the higher timeframe
  • Price must be close to the ATR indicator (plus sign)

Profit Potential is always at least double the risk on entry.

Counter Trend Trade Setups

  • Higher timeframe makes an ADX magenta peak
  • Look at color of ADX line
  • ATR on lower timeframe must be the opposite color (ie if the ADX line is red, the ATR on lower timeframe must be blue)
  • Price must retest the ATR indicator (preferably on lower volume)

Profit potential on the Counter trend trades is always the ATR on the higher timeframe or double the risk on the lower timeframe.

Risk is generally around 15 ticks on a 3 minute chart.  This can be increased or decreased depending on the market you are trading.  Additionally, the profit target is always a minimum of double the risk on entry.  However, you can also trail the trade by offsetting the high or low of the previous bar by five ticks.  The strategy actually has a proprietary algorithm that kicks in once a specified number of ticks has been achieved.

Also, remember you never take a trend trade once the ADX has started plotting a magenta peak.  The magenta peak on the ADX indicator reveals that a retracement is about to begin and you will be stopped out on the lower timeframe.