Hey Trader,
Thursday morning I shorted a rising Nasdaq that was climbing.
Quick orientation first. My levels repeat inside every 100-point block on the NQ, so a 26 sits 26 points above a round number I call the roundy.
I let price print the 33, then sold the 36 with three contracts. It dropped to my exit at the 16 for 20 handles a contract, or 60 on the trade.
Then I said out loud what half the room was probably thinking.
“Why did I short a market that’s going up? Dude, what’s wrong with you?”
I had no idea whether 10:30 would mark the high of the day. My exit was already on the chart before I clicked.
My rule fits in one sentence. I don’t take a trade until I can see 20 points of room between my entry and my exit.
Here’s how I put it to the room:
“I don’t want to push the button until I can see a clear sight to my exit.”
That one check explains the short that confused people. It also explains the entry I missed and the 88 I shorted twice.
Put this check in front of every order. You’ll stop taking trades that never had room to pay you.
Start With What Price Owes You
When I say a level is owed, I mean my probabilities say price should reach it and it hasn’t gotten there yet. Every setup I trade points at one of those levels.
When price comes from a roundy and tests the 26 from below, it has a very high probability of going to the 12. We trade that silver setup live every morning in the Golden Setup room.
On Thursday I told the room exactly what I was holding out for.
“It owes me a 12.”
The 33 sits 7 points above the 26.
When I short a 26 there, I expect the 33 to hold. I’m signing up for 6 or 7 points of heat.
The 33 still hadn’t printed Thursday. I knew the question was coming.
“Why am I shorting if the 33 is owed?”
My answer was short.
“I’ll tell you why. Because that’s all that’s owed.”
The upside owed a few points. The downside owed a 12.
14 Points of Room Wasn’t Enough
ATR was sitting at 24 that morning. I was trading a 20-handle stop.
With that much movement in each bar, I wanted the 33 to get a look before I committed.
From the 26, the 12 sat only 14 points away. That’s short of the 20 I need on a tape like this.
Once the 33 printed, the tape handed me the 36. That spot also lined up with the prior day low, which gave price a reason to stall.
From the 36, I could see 20 handles down to my exit at the 16. That’s the trade I took.
Waiting for the owed level to print moved my entry 10 points higher. It also turned a 14-point trade into a 20-point trade.
Getting In Late Shrinks Your Target
Earlier Thursday I had a long mapped out. Once price tagged the 62, I’d buy the 66 and look for the 26 in the block above.
Price tagged it. I missed the fill.
“Whoops, I was late to the party, obviously.”
Every fill above the 66 left my target a little closer. A later entry gives you the same risk with less reward.
I took one higher entry and tried for another. Then I told the room it felt like we were chasing, because there’s no reason to force a trade.
Peter followed the plan and got in on time.
“The 66 was the money trade for sure.”
The same logic answers an email I get all the time. Traders see a close above the 12 and ask whether they should buy the 06 right there.
I want to see a retracement first. I don’t want to buy the top of a move just because it’s moving.
The Same Level Twice
Later in the session I shorted the 88 with a resting order. I was betting it would push straight down.
Price broke my risk marker instead. The escape hatch let me out for a minus 3.
I didn’t flip long. I had a signal on the chart telling me what price still owed.
From the roundy, a close below the 88 seeks a 62. The roundy on Thursday’s chart was the 600.
I waited for a candle to close back below it.
Then I sold the 88 again and went even on a 78 test. I was looking for the 68, a clean 20 handles away.
It paid 20 handles on each of the three contracts.
“Remember, we’re trying to find a clear sight to a 20 handle trade.”
I shorted the same level both times. The first time, I was betting on a push.
The second time, I could see the exit before I clicked.
Run This Check Before Every Order
Start by naming the level price owes you from your entry. Then measure the distance to your exit.
I moved my bracket to 20-handle trades Thursday because the tape felt choppy early.
Your number might be different. Know it before the open.
When the owed level sits too close, wait for it to print. That wait can hand you a better entry past it, just like the 36 did for me.
When a move leaves without you, let it go. There’s always another setup.
Micros make the heat easier to sit through while you build the habit.
“No shame in my game. Trade micros.”
Looking Ahead
This week gave us a big rally Monday, a sell-off Wednesday, and chop on both sides of it.
Next week could trend or chop. I don’t need to know which one I’m getting.
I’ll find the exit first. Then I’ll decide whether the entry deserves a click.
Nothing was wrong with me on Thursday. I’d already seen where the trade ended before I took it.
The level map, the owed-level signals, and the bracket math I used on Thursday are inside my Golden Setup.
Trade smart,
Tony Rago
Creator of the Golden Setup
