Set-up is a market situation favourable for opening a deal. Depending on the strategy and your trading style, these set-ups may appear several times every month or several times every day. The mandatory conditions for a set-up are signals indicators, technical instruments and high trading volumes.
Depending on the market state, set-ups can appear in case of:
During the trends, set-ups appear in corrections, when the price returns to the previous level, or in moving average or the trend line. It is best to open an order at the extreme point or, in case of high volatility, when the price is leaving the correction period.
When the price is in the sideways trend, a set up is the period when a price reaches upper or lower borders of the range for the second or third time. After three or four of such “bouncings” the price usually leaves the sideways trend, which means a set-up to enter the market for the countertrend.
With scalping set-ups are the most frequent, since traders go for the smallest time frames – usually M1 and M5. Here price movement is the hardest to predict, and indicators have the highest number of faults and errors, this is why scalpers are constantly keeping an eye on the price fluctuations and open orders at the first impulse for several pips.
In case of trend reversal, set-ups are the technical analysis signs (reversal candle pattern or head-and-shoulders patterns, double tops or double bottoms) and indicators signals (divergence, lower volumes). Good position for opening an order is at the trend reversal – after the top level has been hit and the price returned to this level from extremes for several times. Still, it is advisable to lock and take profits at the first strong level.