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Coach's Playbook Posted by Team Topstep May 6, 2021

Can Your Perfect Trade Setup Fail?

Can your perfect trade setup fail? The easiest way to answer this question is by first stating that there is no such thing as the perfect setup. Anyone who’s ever traded can tell that nothing works all the time in this business. Changes in the market environment happen swiftly and without warning, which means strategies need to be updated almost constantly. So, the short answer is; yes, your perfect trade setup can fail.

Funded Trader Shoutout

As the Nasdaq-100 futures (NQ) made its way down to the 50-day moving average early on in the week, a pair of Topstep funded traders took advantage of the boost in volatility to capitalize on the short side of the market.

This week’s funded trader shoutout goes to Paresha Y. and Vince C., who both put up well over $5,000 in their Funded Accounts® selling the rips in the NQ. These two traders have shown that tracking changes in the market and adapting to them does pay off!

Can Your Perfect Trade Setup Fail?

Now that we know the Golden Goose that lays the Golden Eggs simply doesn’t exist, we can start talking about the ways we react when our best setups fail. We all put a lot of time into developing our strategies and favorite trade setups, but to believe that they are infallible is somewhat foolish. On a long enough timeframe, every setup will eventually produce losing trades, it’s inevitable.

In reality, any trade that can produce a winning outcome more than 50% of the time can reasonably be considered a AAA setup. If you’re using a simple 2:1 reward-to-risk ratio, then making money on more than half your trades is as close to the Golden Goose as you can get. That said, you need to prepare yourself to handle the losers when they pop up too.

When you see that AAA setup starting to form and you enter into a position, you’re doing so out of confidence in your strategy. So, it would make sense to not stray from your strategy in the event the trade starts to move against you, right? It’s times like this when over confident traders lose the most money. They know they should get out, but they have a hard time admitting when they’re on the wrong side of the market.

Try to be flexible, but never fall in love with a position. Remember, a strong setup will produce another opportunity, so shake off the losers and get ready for the next trade.

Trade Well!