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Trading fundamentals · not a single setup, three rules used across every trade on this site

Three Price Action Rules

A continuation trade you're already wired to recognize, a stop you define before you're ever in the trade, and a plan for adding to a winner instead of just wishing you were bigger. Three small adjustments that fix most of what actually costs traders money.

3rules
~20%of trades offer a real add
1rule — define the stop before the entry

Watch one touch and go

1

Trade the continuation you're already wired to recognize

  • Most traders default to breakouts or fade trades off an overextension, and overlook a third option: a continuation trade off an already-existing trend, built on a simple, repeatable pattern your brain is already good at recognizing.
  • The specific version: price breaks a consolidation's low, pops back up to retest that broken support — now resistance — and then continues in the original direction. Base the read on a higher time frame (commonly the 15-minute), and let that same chart define your stop before you execute on a lower one (1 or 2-minute).

Breakout trades demand near-perfect timing. Fade trades demand recognizing a distinct change in character. Both are real, specific skills. A continuation trade leans on pattern recognition, something humans are already good at — which is exactly why it's so often overlooked.

2

Define your stop before you consider the entry

  • If you don't set your stop first, you're trading market randomness instead of a plan — you can't calculate expected value on a trade where you don't actually know what you're risking.
  • In the continuation example, the stop sits above the high of the candle that made the touch; the target is the low of the original move. Know both before you're in, not after.

A trade idea without a defined stop isn't a trading strategy, it's a hope. Once the stop is set, the risk is known — and only then can you actually calculate whether the reward justifies it.

3

Add to winners the right way — not just because you're undersized

  • Roughly one in five trades offers a genuine chance to add. Treat that as the baseline, not something to force on every winner.
  • A real add needs a completely new setup, not just a feeling that your size was too small — a fresh, tighter consolidation forming after the move works, with its own new stop (above the high of that consolidation's wick) and its own new entry (the break of its low).

Adding because you're up on a trade, or because you weren't big enough to begin with, can crush the very expected value that made the trade worth taking in the first place. Adding into a real reversal instead of a fresh setup is exactly how that happens.

Break, touch, go — and the add that follows

One continuation trade from entry to exit, plus the second consolidation that gave it a legitimate chance to add.

Consolidation low — broken support, now resistance break touch go Break of the low, then a pop back up to retest it — the touch. Stop above the touch candle's high. Entry on the break lower — the go. A second, tighter consolidation forms below the lows — a completely new setup to add. add #1 A third consolidation — another new setup, another legitimate add. add #2 2-bar trail exit Volume

Which pop-back you can trust

The same setup on the surface. What the retrace actually does is what separates the trade from the trap.

broken support Take it Touches the old support, stalls, and continues. A clean touch and go. broken support Skip Retraces well above the old level. That's a failed breakdown, not a touch. broken support Skip Never even gets back up to the level. There's no touch to trade off of. broken support Skip Touches, then just chops sideways. No real go — wait for the next attempt.

Two time frames, one trade

Where the read comes from, and where it gets executed.

Base the idea on the higher time frame

Often the 15-minute chart — let the stop get defined there before you do anything else.

Execute on a lower time frame

A 1 or 2-minute chart, once the touch confirms and the go actually starts.

A fresh consolidation is a new trade

Not a reason to force a bigger size on the first one — it earns its own stop and its own entry.

Size off the touch candle, not a guess

The touch tells you where you're wrong. Numbers below are illustrative.

Risk budget for the trade$500.00
Entry — break of the touch candle's low (the go)47.90
Stop — above the high of the touch candle48.65
Risk per share$0.75
Position size666 shares

The mistake this prevents

Enter as soon as price touches the old support instead of waiting for the go — say, right at 48.40 — with no stop actually defined yet.

You're now in a trade with an undefined risk, guessing at a stop after the fact instead of knowing it going in.

The touch tells you where to watch. The stop belongs above it, decided before you're ever in the trade.

The five-second gut check

The thought that's about to talk you into one of these mistakes, and what it actually costs you.

1  "It's about to break, I'll get in early"

Taking the same idea two or three times before the setup actually forms, burning capital and patience before the real trade even shows up.

Kills: having nothing left when the trade finally works.

2  "It looks so good, I'm in"

Entering on the idea of the trade with no stop actually defined yet.

Kills: trading random market noise instead of a plan.

3  "I wasn't big enough"

Adding to a winner just because size feels too small, not because a new setup formed.

Kills: crushing your own expected value by forcing an add.

4  "It's basically the same setup"

Adding without a fresh, distinct consolidation and its own new stop.

Kills: doubling the same risk instead of taking a genuinely new one.

Watch the video

Continuation trades, setting the stop before entry, and adding to winners the right way.

Open on YouTube ›

Small adjustments. Outsized difference.

None of this is a single setup you can draw on a chart — it's three small, correctable adjustments that show up in almost every trade on this site.

  • A continuation trade plays to pattern recognition you already have — it doesn't require the split-second timing a breakout does, or the change-of-character read a fade does.
  • Your stop comes before your entry, every time, not after you're already in and hoping.
  • An add needs its own new setup and its own new stop. Being undersized on the last one is never a reason by itself.

Framework as taught in a trader-development video on continuation trades, defining a stop before entry, and adding to winners correctly. Not a single setup — three rules that apply across the setups on this site. Watch the reference video →