Entry setups: where to actually get in
Lesson one gave you a trend you can define. This one turns it into a trade. Twelve setups — five on the daily chart, seven on the hourly — each with the risk the author himself puts on it.
Lesson 2 of 12. Some setups need a platform that shows real volume; each one says so.
Two timeframes, and where every entry comes from
The strategy splits the trend in two. The primary trend is the daily chart and it decides direction. The secondary trend is the one-hour chart and it decides timing.
The rules do not change between them. P1, P2 and P3, the important area, and the close that makes a point definitive all work exactly as they did in lesson one — only the bars are smaller.
One rule governs everything that follows, and it is worth reading twice: in the primary trend the entry always comes from a correction. Never from the momentum, and never against the direction. Every daily setup below is a way of answering the same question — has this correction finished?
Setup 1 — the hammer at the end of a correction
A hammer is a candle with a small body and a shadow roughly twice the body's length. On its own it means very little. What gives it meaning here is where it appears.
The candle must form during a correction, and it is read as that correction ending. Colour does not decide the trade: for a daily hammer either colour is valid, though a red one in a downtrend and a green one in an uptrend are preferred.
The order goes at the close or open area of the candle depending on the direction, and the stop goes beyond the shadow.
- It has to be in a correction. A hammer taken against the primary trend carries high risk — his words, and the most expensive way to use this pattern.
- The entry is placed for the following day, off a candle that has closed.
- The stop sits past the shadow, not past the body.
Setup 2 — the double outside
Where the hammer is one candle, this is a three-candle sequence and it waits for more proof. It begins only after the correction has reached a reasonable depth — around half the movement.
Going long, at the end of a correction downward:
- Mark the whole body of the last bearish candle. That is the area.
- The next candle must close above that area.
- The third must close above the second.
Why a volume weighted average, and not a moving average
The next setup uses VWAP, and it is worth being clear about why, because the difference is not cosmetic.
A moving average is built from closing prices. One number per candle, averaged. It smooths, it identifies direction, and it lags — structurally, not because it is badly tuned. It cannot know anything the close does not tell it.
VWAP weights price by the volume that traded at it. It answers a different question: not "where has price been" but "where was the business actually done". That makes it an average institutions measure their own fills against.
Getting it needs Level 2 data, and the difference between the two data levels is worth setting out properly, because everything from here on depends on it.
Level 1 is what most retail platforms give you, and it is four things: the best bid and ask, the last traded price, a volume figure, and the time of the last quote. He attaches a warning to the third — on a CFD, and on forex CFDs in particular, that volume figure is not usable at all. A VWAP computed from it is an average of your broker, not of the market.
There is a second consequence, and it explains why so many indicators lag. What Level 1 leaves behind at the end of a period is four numbers — open, high, low and close. Every moving average and most classical indicators are computed from exactly those, so they inherit both the delay and the coarseness of the candle they came from. It is not a tuning problem and no setting fixes it.
Level 2 is a different kind of data rather than more of the same:
- Order book visibility — the bids and offers resting behind the best price, from market makers and everyone else.
- Depth of market — how much is bid or offered at each level beyond the top of the book, which is what supply and demand actually look like.
- Price, time, tick size, order and volume detail for every trade that prints, including its size.
- Volume segmentation — buying volume and selling volume reported separately. This is the one that matters most: it is what makes delta possible at all, and it is why setups 4 and 5 below exist.
Setup 3 — Midas VWAP, and the line it leaves behind
This one predicts where a correction will end rather than waiting to be told.
Anchor a VWAP at the extreme of the movement — the highest close or open in a downtrend, the lowest in an uptrend — and draw it to the other end of that movement. Then extend it forward in time. The deck calls that extension the WEX, and it is very likely to be where the correction turns.
Then wait. When price reaches the line, you want a candle to close in the direction of the trend — green in an uptrend, red in a downtrend. That close is the entry, and the stop goes beyond the WEX. If the candles close the wrong way instead, a single outside bar can be used, and it must close on the correct side of the VWAP.
- Volume slope should be negative through the correction and positive through the movement. If it is not, the setup is not confirmed.
- Do not draw it on a movement whose delta disagreed with it — that movement was not supported and the average it produces is misleading.
- If the line sits very near price, or below the 30 per cent retracement, treat a reversal as live rather than a correction.
Setups 4 and 5 — when the delta disagrees with the movement
Delta is aggressive buying minus aggressive selling — a number Level 2 data makes available and Level 1 does not. Lesson three is about nothing else; here it is only needed as a condition.
Normally a down movement carries negative delta and an up movement positive. When a movement runs the other way — price falling while the delta is positive — the move is not being paid for. The deck calls the entries that follow the sharp and fishing entries, which is his own term.
Setup 4 waits for a movement with delta divergence, then a correction back to the previous P3, then the first candle closing against the divergent movement. Stop beyond that candle, target the far end of the correction.
Setup 5 covers the case where an uncertain movement starts with delta and volume slope already against it, usually because the orders behind it were never filled. The market then re-corrects inside that uncertain movement, often by the whole of it, and the entry is taken the same way after the re-correction.
Both need the same four steps, in order:
- Find a movement whose delta disagrees with it.
- Wait for the correction that follows, and specifically for it to reach the previous P3.
- Wait for the first candle to close against the divergent movement. That close is the entry.
- Stop beyond that candle; the target is the far end of the correction.
Dropping to the hourly chart
Everything so far was decided and executed on the daily chart. The seven setups that follow use the daily chart only to choose the direction, and take the trade on the one-hour chart instead.
The reason is space. A daily correction can be several hundred points deep, so a stop placed by daily structure is wide and the reward against it is poor. The same correction on the hourly chart has its own P1, P2 and P3, and its own definitive break — which gives a much closer place to put the stop.
One term matters throughout: any trend formed before the previous trend has broken is treated as uncertain. Whether a setup waits for that break is what separates the safe ones below from the dangerous ones.
The seven hourly setups, ranked by his own risk labels
Each of these carries a risk label on its slide. They are his, and they are reproduced exactly — sorted here from safest to most dangerous, which is not the order he presents them in.
- VERY LOW — Setup 2. Entry from an uncertain P3 on a certain trend, on the daily movement only. There is not enough room during a correction for this one.
- LOW — Setup 1. Entry from a certain P2 on the secondary trend, after the previous hourly trend has definitively broken. Stop above P3; the targets are the P3 points earlier trends left behind.
- LOW — Setup 5. Uncertain P3 on the daily movement, using Midas VWAP on both timeframes. Low because it is on the movement and it still requires the break.
- MEDIUM — Setup 4. Uncertain P3 on the daily correction with Midas VWAP. It requires the break but skips waiting for the new hourly trend to form.
- MEDIUM — Setup 6. Uncertain P3 on an uncertain trend at the end of a correction. Taken only where price has hit the primary Midas VWAP and returned below it.
- HIGH — Setup 3. Certain P2 on an uncertain trend. This is Setup 1 with the trend-break condition removed. Use minimum size — his instruction, not ours.
- Setup 7 has no label: delta divergence applied on the hourly chart, used to improve an entry already taken or to move a stop to break-even rather than to open a position.
Where he says to take nothing at all
Slide 51 ends the section with a warning that is worth more than most of the setups before it.
Do not open a position — in either direction — at a trend formation point. Not a buy and not a sell. And never open one against the direction once a trend has formed.
The reasoning is short: the end of a movement is not predictable. You are trying to price something the market has not decided yet. In his words, the largest losses a trader takes are made at exactly these points.
The rules that apply to all twelve
These sit at the end of the section and are not attached to any one setup.
- Identifying the trend and its location is the skill everything else rests on. No setup rescues a misread structure.
- All of it works in both directions. Nothing here is a long-only method.
- The four-hour chart is not part of the strategy. Consult it for a clearer view in noisy conditions, but do not build entries on it.
- Do not trade the primary trend directly. The stop distance is too wide to justify, especially in a sideways market — the daily chart is for direction.
- Wait for a setup to form. Changing setups out of impatience and then justifying it afterwards is the failure mode.
- Never move a stop from where it was placed. Take the smaller loss.
- There are no certainties. Under some conditions the stops described here will be wrong too.
- Trend trading is a complete style. If you blend it with another one, do not alter its framework.
What to take from this one
Three things, in order of how much they matter:
- In the primary trend the entry always comes from a correction. Every daily setup here is a different way of asking whether the correction has finished.
- What separates a low-risk hourly setup from a high-risk one is almost entirely whether the previous trend has definitively broken. That one condition is the ranking.
- No buy and no sell at a trend formation point — and a stop, once placed, does not move.
Next: the delta these setups keep referring to
Three of the setups above turn on the delta disagreeing with the movement, and this lesson only defined it. Lesson three is the mechanism — delta cycles, divergence, and why the market so often returns to where a move began.