Setup vs Process Based Trading

Many traders focus on the idea of a setup. The idea of the setup is this idea that specific patterns can be identified that tend to produce a certain kind of result on a consistent basis. I've detailed some of the best order flow "setups" that I've identified using AlphaReveal. However, the focus on setups misses a large part of what the best discretionary traders are actually doing. Of course, most traders have setups or patterns that they can readily identify. Yet, the real strength that many top level traders posses is a process oriented approach to the market. Process based trading is a trading method that focuses on the processing of market generated information. It is this skill of processing market generated information which the best traders possess. A great deal of thought and work went into AlphaReveal specifically to enable traders to achieve their highest level of flow where optimal trading takes place.

Now, the reality is that there are many successful ways to trade and AlphaReveal integrates well with many trading styles. Setup trading involves essentially waiting for the market to reach a very specific state in an attempt to profit from an exceptional opportunity. Process based trading can make use of setups to a greater or lesser degree. However, process centric trading is focused on reading the real-time market generated information to understand what the market is currently doing and where it is likely going in the near term. A wide range of opportunities can be pursued from such a vantage point. Tape reading is a form of process based trading.

Wednesday, March 27, 2013 12:10:00 AM


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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure:

Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.