High Probability Setups
Here are three high probability setups that can be identified using the Wyckoff trading methodology. Each setup has a risk to reward ratio of 1:2 or better.
Setup 1: Spring
A Spring setup occurs at the end of a downtrend and indicates a potential reversal. Follow these steps to identify a Spring setup:
- Look for a significant support level on the daily or 4-hour chart.
- Price action breaks below this support and then quickly recovers, forming a higher low on lower timeframes.
- Confirm the recovery with increased volume, indicating buying interest.
- Set a risk to reward ratio of 1:2 or better for this setup.
Setup 2: Upthrust
An Upthrust setup occurs at the end of an uptrend and indicates a potential reversal. Follow these steps to identify an Upthrust setup:
- Identify a significant resistance level on the daily or 4-hour chart.
- Price action breaks above this resistance and then quickly falls back below it, forming a lower high on lower timeframes.
- Confirm the decline with increased volume, indicating selling interest.
- Set a risk to reward ratio of 1:2 or better for this setup.
Setup 3: Breakout Pullback
A Breakout Pullback setup follows a breakout from a consolidation area and indicates continuation of the trend. Follow these steps to identify a Breakout Pullback setup:
- Identify a consolidation area on the 30-minute or hourly chart.
- Look for a breakout above the resistance level with increased volume, confirming the breakout.
- Wait for a pullback to the breakout level. This pullback should be on lower volume, indicating a lack of selling pressure.
- Enter the trade on the first sign of strength (e.g., a bullish candlestick pattern) on the 5-minute chart.
- Set a risk to reward ratio of 1:2 or better for this setup.