A+ set-ups in the market are something really sought after, but what makes a good trade? What makes an A+ set up in the market?
An A+ setup is a trade set-up within your rule-based system that you’ve seen trade hundreds of times over and have seen success with!
These set-ups don’t appear 100 times a day, and sometimes don’t even appear every day!
However, how do you come up with something of the sort? It’s got to be a rule based around specific criteria that all have to line up.
This is an example of what I’ll be showing off today, 2 A+ set-ups in the futures market that have a high probability of success. They’re never going to be 100% profitable even if they are the best setups in the arsenal, that’s how trading works.
These set-ups are based on Auction Market Theory and understanding market imbalances and balances. Once we’re able to locate large market balances, we have a good understanding and read of the markets.
Auction Market Theory is a trading philosophy that allows traders to get a read on the market based on volume, being the number one aspect that actually is able to move price. I tie in order flow to help me understand the entry and exit strategy more with these setups.
We now have a playbook available that covers my Full Futures Trading System, it’s called the Blueprint to Trading Futures. Take a look at how these setups are created and what it takes to find A+ setups! Now available on our site, get it here!
A+ Trading Setups:
- Initial Balance excess retest
- Extended Trading Hours Auction Reversal
I’ve come up with some fancy names here that might not mean a lot but it’s a good way for me to just break down which is which and when I explain what they’re all about ideally it makes a little more sense.
Initial Balance Excess Retest
This trade is based on the market profile, where we have the first hour that creates the initial balance (IB). This first hour of trading off the New York sessions spans from 9:30 am EST to 10:30 am EST, this creates the high and low between that time period on a market profile.
Market profiles are similar volume tools to the volume profile that create volume and balance, and outside of that balance imbalanced areas.
As a trader, I want to hunt the imbalanced areas so that I can find a larger move in the markets.
There is a general rule that if we get a period close outside of the IB high or low, there is about 70-75% of a chance that we’re going to see the continuation of that trend move.
That means the A & B period makes up the first hour, each of these periods is 30 minutes. Together whatever trades in the first hour creates the high and low.
C-period and beyond (eg. D, E, F, G etc) is the first period that can trade in excess above the IB high or below the IB low. The key factor here is to make sure that one of these periods makes an excess move but also actually closes well outside of the IB low or IB high because that is what’s going to trigger the trend move.
There’s more to this than just blindly buying or selling the IB retest, I solidify this strategy and setup by using the large auction extremes at my disposal from a 200-day profile or another type of large profile. This is where the IB high or low would want to align with the large excess so you have more confirmation of the move itself.
We can plump this up with some order flow too, I’ll be explaining in terms of the footprint what I want to see in these areas to actually pull the trigger.
What does this all look like though?
In the image below you can see the thick white line to the left of the market profile, this allows me to see the top and the bottom of the Initial balance, in essence, this is the initial balance. We have a close of “C-period” below the IB low, which means there’s a high probability that prices continue the trend to the downside about 70-75% meaning it’s not a guarantee.
I am looking for a retest of the area, but I don’t want to blindly just get in, I want to make sure there is confirmation at the area so I can shoot my short.
Meaning the first large seller that comes in against a trapped buyer in my case. We also have a large balance low there from the 200-day profile in the image that’s creating the opportunity for the seller to keep hold of prices and push lower towards the 5440 area in this case.
This is the S&P 500 futures chart.
When it comes to order flow, I would use the Footprint (FP) to identify where there is heavy selling occurring as well as buying that’s getting clustered and trapped.
As I see in the image below, I’m looking for those large sell deltas that come into price and actually hold for a press lower, this is what’s going to help me get in on the trade.
When I see that large seller step in, I want to see a reaction to the downside, and then I can look for my entry to get on board.
This is what we get on the continuation throughout the day: a large downside trend move that drops about 65+ points on the ES from the area.
This setup also works on the other side, if we can accept a period and we close above the IB high, then we would expect a larger trend to move to the upside.
Extended Trading Hours Auction Reversal
The second setup that has a really high probability is a large reversal trade, however, it happens through a few sessions in itself, meaning I am looking at large market balances based on the 200-day profile.
Should prices accept a new balance during the RTH and close within that new balance, then the thought is that we’re going to see prices want to lean on the bear side. However, on the overnight (ETH) session, for that to continue we would need prices to actually close the ETH within this auction.
This is where my setup comes into play.
If we get a move on the RTH that closes within an auction lower, then on the ETH we notice that prices actually make a move back outside of that auction to the upside, into or above a new auction higher, I am flipping bullish. This is like a gap-up play, where I want to buy the dip on the gap-up to continue the momentum.
Likewise, if I see an RTH session close in an auction higher, but the overnight session actually moves down into a distribution and closes prices in a lower balance, I will look to sell rips on that gap lower.
Hard to visualize? Take a look at the example below to help you understand what I mean by this movement.
Let’s take a look at a few examples here.
Both of the examples above help us understand where the buy side and the sell side are expected to come in based on the larger distributions or as many call them balances. If we fail to continue the momentum overnight and create that gap back within a large auction, balance area, we are expected to see the continuation of that overnight move.
In this case, I want to be active at the key extremes of the large balance, where the acceptance of the prior balance is available.
If I open back within a lower balance as in the second image, I can sell the top of that balance as well as the break of the bottom of the balance because that means there is going to be sell pressure in prices that accepts even more imbalanced regions.
Likewise, on the flip side, if we accept a new balance higher, then I would like to be bullish off the lows of the balance that has newly been accepted.
We now have a playbook available that covers my Full Futures Trading System, it’s called the Blueprint to Trading Futures. Now available on our site, get it here!
For further information and explanation on the 2nd A+ setup that’s broken down based on Auction Theory and balances using profile, you can watch our YouTube video on how to understand it fully! You can check it out here!
