Step 4 — Trade Setup

You already did a fantastic job. Just to recap: You identified crypto assets that flashed trade signals, showed proper backtest results, had valid technical indicators, and had a solid chart setup. That’s probably more than most so-called traders have when they enter a trade.

Now, it is time to set up the trade. The core idea of the trade setup is to define all aspects in a way that allows you to “set and forget” the trade. That means, once executed, you don’t have to (and actually shouldn’t) monitor the trade. Everything is defined, and you prepared the trade for all scenarios.

Trade Attributes

To achieve that, you have to define at least the following attributes:

Entry Level

This should be a no-brainer if you accomplished the previous steps. According to your chart analysis and the trade signal, you know whether you can enter the trade immediately or if the asset has to reach a specific price (for example, support or resistance level) first.

Stop Loss

It is probablyThe single most important attribute when it comes to trading. Never enter a trade without a stop loss. It doesn’t matter how bullish the market is, how convinced you are, or which information you have. A trade without a stop loss is a ticking time bomb — always! Don’t do it.

To define the stop loss level, you can utilize different approaches. Here are a few examples:

• Based on support and resistance levels (make sure to leave some buffer instead of using the exact level).
• Usage of indicators, such as the Average True Range (ATR)
• Derived from your profit target and the risk/reward ratio

Take Profit

Similar to your stop loss level, it is also important to define your profit target. The same applies here: Don’t enter a trade without one or multiple clear targets. A trade without a target is no trade!

Here are two approaches I usually use to define the take profit level:

• Support/Resistance areas: The most straightforward yet effective and reliable way.
• Backtest data: Crypto OS provides information about the probability of reaching certain targets. Therefore, you can simply choose the target with a probability that fits your strategy.

Often, it makes sense to go for multiple targets, like two or three. However, this always depends on the chart. I favor a two-target approach:

1. 1st Target: Often, the next support/resistance level. Once this target is reached, I take 30-50% profits. At the same time, I adjust my stop loss to the entry level, which makes it impossible to end in a loss.
2. 2nd Target: A more ambitious target where I finally close the entire trade.

General Aspects

Your trade setup should include details about the capital you invest, margin (in case you really want to do it), etc. However, those aspects aren’t trade-specific; you should define them on a general level.

Checklist & Material

Checklist

Documentation Template

Table of Contents

• Step 4 — Trade Setup
• Trade Attributes
• Entry Level
• Stop Loss
• Take Profit
• General Aspects
• Checklist & Material
• Checklist
• Documentation Template

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