Day Trading Setups (Holy Grail?)

I am on the road to have my first profitable month day trading since I have started day trading.  I probably took about 2-3 day trades per week starting back in January or February up until April.  I was up a little, down a little, back to break even.  Since I couldn’t take more than 3 trades per week due to the PTD rule, it was a good way to ease into it.

In May I finally opened up a proper day trading account.  First month did not go so well. The mistake I made was over trading.  Having the freedom to move in and out of trades as I please was more of a bad thing than good.  So I lost about 10% of the account.  My P/L was actually not so bad, it was the fees and commissions that took my account down so much.  Some days I was in and out 15-22 trades.  I read about other guys doing shit like that and said what an idiot.  Who takes 22 trades in a day.  Yeah, well……

Second month was a little more of the same.  I was taking less trades and started seeing some profits.  So I immediately increased my risk per trade and 2 bad days in a row and I had loss all of my gains I had made.  So now I was down about 15% of the account.

Third month, July, is when I am finally seeing some consistency.  Took it slow with my risk.  Taking less trades, being patient with the setups I am familiar with and tracking tracking tracking everything.  Tracking is so very important.  People say knowing yourself as a trader is the holy grail.  Well, you can’t know yourself unless you track what you are doing and finding out what you do well.

I downloaded a trade journal that lets you track pretty much everything and it computes your win%, setups that work for you, time of day, which profit taking methods work best and so on.  So now I know from the data, what has been working and what hasn’t.  A real eye opener.

I’d like to share with you guys what has been working for me the best.

July (first profitable month) statistics:


Win % – 53%        Long – 30%         Short – 64%

Payoff Ratio – 1.96 (winners are almost double my losers, winning % at 50%, I’ll trade like this all day every day)

This also tells me I’m more successful taking shorts.  So I adjusted by only taking the absolute best long setups.  I don’t even look to go long unless it’s shouting at me, take the trade, take the trade!

Time of Day Performance

  • 9:30-9:50 – 61% win
  • 9:51-10:00 – 40% win
  • 10:11 – 10:40 – 20% win
  • 10:41 – 11:14 – 50% win
  • 11:15 – 11:31 – 100% win (only 1 trade taken)

I win mostly right after the open.  I have a bias based on the daily chart or gap and take the trade.  Not only do I win the most here, but it also nets me the biggest profits.  So now I actually don’t really take trades after 10:00AM EST and only manage trades I’m in after that point.  Unless something is absolutely shouting at me to take it, I’m very hesitant to trade after this time.

Entry Setups (Don’t mind the abbreviations, I’ll explain them in a later post)

  • TBOP – 0 for 2
  • TBDP – 1 for 1
  • 1m PB – 6 for 13.  1.7 payoff ratio
  • 2m PB – 3 for 4.  1.85 payoff ratio
  • 1m 3BP – 4 for 5.  1.76 payoff ratio (my 2nd favorite trade but this setup doesn’t come along often and when it does you have to be quick quick quick)
  • 1m ORB – 3 for 4.  1.73 payoff ratio (and highest payout expectancy – my favorite trade because it makes me the most)

Profit Taking

  • Fixed Target – Set a 1.5 to 2x R target based on the setup.  ORB and 3BP do best with fixed 2R-3R target
  • Dynamic Target – 1/2 off at 1R, 1/4 off at 2R, 1/4 off trailing the swing/pivot.  Also works well on the ORB and 3BP setups but seems to work best on the pullback setups.  And actually taking off 3/4 at 1-1.5R is best.  I’ll explain why…..

Before I started tracking my trades, I had no idea what was working and what wasn’t.  I just took trades based on technical analysis books like pullbacks, breakouts, etc.  I usually used a 1 min time frame and just kept doing it and doing it and taking targets whenever I felt like it was a good time to take them.  NO.  Like a parent telling their kid.  NO!

Track your shit.  It’ll open your eyes and give you the confidence you need to let the trade work.  And of course I am still working on letting trades develop and following what the numbers tells me but it is hard, of course.  If you don’t track them, you’ll never know how to approach profit taking for a particular setup.  And I really believe each setup will yield different profit potential. You won’t know how much money you didn’t make because you aren’t tracking it.  Again, different setups yield different profit opportunities.

For example, in my experience, taking a pullback trade after the initial move has made its move or the trend has already been established usually won’t give you as much.  Get in and get out.  Everyone has spotted it already.  The big move from the open has already happened.  You’re now in it from the crumbs.  So take your 1-1.5R and move on.  You’ll probably have a higher winning percentage but smaller wins.

Taking the opening range breakout will yield you much better.  Because that is the “igniting” move of that stock.  That is the move that basically starts the trend.  So of course, you will most likely be able to get 2-3 or more R out of it.  You wouldn’t know this without tracking your trades though.  Winning percentage will be smaller, but you’ll win bigger each time.  Know this before you take the trade and set your target accordingly.  Because if you still take profit at 1R like you did the pullback trade, and it only wins 40% of the time, you’re a losing trader.  If you know this setup nets a minimum of 2R 80% of the time it moves past 1R and it wins 40% of the time, you are now profitable.  Same setup, same entry, just having the confidence and knowing when to hold on makes you a profitable trader.  

Taking a breakout or breakdown in the middle of the day is usually not as lucrative as in the beginning of the day.  I found these setups get stuffed pretty quickly as well.  So take off 3/4 of your position at 1R and see what the rest can do.  Or take off the whole thing at 1R.  It all depends on what your tracking journal is telling you.

So, don’t fall into the trap of setting an arbitrary target each time without doing your research.  I fell into the trap of just setting an arbitrary target on many of my trades and when I go back and look at them, I realized, damn these are good entries, but instead of taking off half at 1R or exiting all at 1.5R, I shot for all or nothing at 3R and came home with a full stop out.  Shit.

Yeah, taking a pullback off of an already established trend on a slow stock hoping to get 4R is not a winning proposition.  Taking a trade at the open based on a breakout on the daily chart with positive earnings report?  OK, yes 4R is realistic.  Go for it.  See what I mean?

By no means am I a super profitable, ultra successful trader just yet.  But I’m getting there.  And each month I’m improving.  So here is my suggestion.  Take a month or two and risk small size.  Risk $20 or something.  You’re going to lose money during this time, no doubt.  This is time for you to track everything.  Do not take stupid impulsive trades (that’s why I say risk $20, if you do it on sim you’ll start fucking around too much).  Take the setups you learned.  Just set an arbitrary target at 1.5R or something.  At the end of the month find out which setups win the most and least, go back to the charts and find out where the best profit targets would have been.  Maybe 1.5R is perfect for your specific setup.  Track how much you would’ve won at 2R.  Track it how much if you scaled out half at 1R, half at 3R, etc.

By the end of a month or two you’ll have a decent idea of winning percentage of setups and which target is most profitable.  If you have a setup that wins 30% of the time but the times it wins it goes 6R, great.  Set your target at a little less, maybe 5R and figure out if it is still a profitable setup.  If not, dump it.  You have a setup that wins 80% of the time but only nets you .8R?  Might seem good, but after commissions and fees it’s a losing setup.

Point is you’ll only know if you track it.  I never understood what successful traders meant by “you have to work hard to make it at trading,” and I think this is what they meant.  It’s not fun.  It’s like doing chores.  But I make time every week to do it.  And it has made all the difference so far.  Put in the work, track your shit, adjust your plan accordingly.

And when you start making money, send some my way.








One thought on “Day Trading Setups (Holy Grail?)

  1. track your shit

    i absolutely agree with this. i think that this should be an acronym u use when/if u train others – TYS


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