Make Trade Setups Come To You

Once every five years, against my better judgment, I get roped into going to a professional baseball game, rationalizing that this time it might be fun. But sure enough, by the time the fourth inning rolls around I’m bored out of my mind from watching an endless loop of…

ball – strike – [step out of batter’s box] – foul ball – foul ball – [throw to first] – foul ball – [naked guy on field] – ball – strike – foul ball – balk…

I mean, if I’m going to take the time and effort to go watch a sport, it should be something with action, like hockey, basketball, or curling.

However, while attending an Angels game last season, my attention was temporarily diverted from the snoozefest on the field to something unexpected, which I’d never experienced before – servers coming to my seat, taking my order, and delivering food right to me.

Sure, life teaches us that we should go after what we want and that anything worth having is worth pursuing, but sometimes it’s cool to just sit on your ass and have a mega-beer and double jalapeño nachos placed gently in your lap.

For traders, having setups brought to you instead of hunting them down would also be pretty cool. Well, there’s a way to set up your watch lists to do just that, something I like to call the “Triple F System.”

The first “F” stands for “filtering” – the process by which you take a group of stocks and segment them into actionable lists. This can be done with either end-of-day technical and fundamental scans or by visually reviewing charts one by one to find candidates that are approaching entry points.

Once your have the results, put them into three different groups;

  • Day trades
  • Swing trades
  • Long-term trades

Then transfer these lists to your real-time platform or charting software which sets the stage for the second “F” – focus.

This is when you’ll configure and organize your stocks in a way that will keep non-movers out of your way, and bring potential trade setups right to you.

First, start with your swing trade and long-term lists, which will contain stocks that are farther away from their entry points than those on your day trade list. You don’t want these stocks to get in your way until they are ready to trigger so set alerts 50 cents below entry points for swings and $1.00 or more for long-term stocks.

Next, you’ll do the most important thing in this process – minimize these lists so they don’t take up valuable screen real estate needed to focus on day trade candidates.

Then set alerts 10-25 cents below the trigger price of the stocks on your day trade list and auto sort it, ideally by the “% change in average volume.” This will constantly push stocks that have the highest increase in volume relative to their average to the top of your list – and volume is what moves stocks.

If you don’t have those volume criteria available on your platform you can use “% price change” instead, which though not as effective, will still push movers to the top of your list.

Now you can solely focus on stocks that might become actionable – the ones constantly being brought to the top of your list – and forget about those at the bottom. And if any stock on your swing trade or long-term list gets near an entry point, an alert will trigger and it will automatically be loaded into your chart window.

Setups will literally be brought to you.

This system gives you the freedom to watch other things like the indexes, market barometers, news feeds, or look for intraday setups without worrying that you’ll miss a potential trade. It works best for breakout trades – long or short – but can be modified for pullbacks to support or resistance as well.

And the third “F”?

There isn’t one.

The “Triple F” system just sounded better than the “Double F” system.

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