← Trendline Course · Module 11 of 15

Four High-Probability Setups

Reversal, continuation, fake-out reversal, and the liquidity hunt.

Here are four specific setups you can watch for. Each has defined characteristics and clear entry criteria.

Setup 1: Trendline Reversal

Situation: Price has been in a sustained trend and breaks the primary trendline for the first time.

Look for: a clear, well-established trendline (3+ touchpoints); a strong breakout candle; follow-through candles; a break of the first significant swing high/low.
Entry: on the retest of the former trendline (it often flips support↔resistance) or at a fair value gap created by the impulsive breakout.
Stop loss: beyond the most recent swing point in the direction of your entry.
Target: the next major support or resistance level in the new direction.

Setup 2: Trend Continuation

Situation: Price is in a clear trend, pulls back to a trendline, and then resumes in the direction of the trend.

Look for: an established trend (higher highs/higher lows, or lower highs/lower lows); a pullback to test the trendline; weakness at the trendline (small candles, a reversal candlestick); a confirmation candle in the trend direction.
Entry: after the confirmation candle, or on a retest of a nearby support/resistance level.
Stop loss: below the low of the pullback (bullish) or above its high (bearish).
Target: the previous high (bullish) or previous low (bearish), and beyond.

Why it works: each successful touch-and-bounce confirms participants still respect the line. Entering at these bounces gives you a well-defined risk level with a clear directional edge.

Setup 3: Fake Out Reversal

Situation: Price briefly breaks a trendline but shows all the signs of a fake out, then reverses hard the other way.

Look for: small, unconvincing candles at the break; equal highs/lows just beyond the line (liquidity); a breakout candle much smaller than recent swings; a strong reversal candle forming quickly; price breaking back through the line and then taking out a swing low/high.
Entry: after the reversal candle closes, or on a retest of a newly formed fair value gap in the reversal direction.
Stop loss: above the high of the fake out (bearish trade) or below its low (bullish trade).
Target: previous swing lows (bearish) or swing highs (bullish).

Why it's powerful: fake outs trap traders on the wrong side. When those traders get stopped out, their stop orders become fuel for the real move in the opposite direction.

Setup 4: Trendline Liquidity Hunt

Situation: Price is in an established trend and trendlines act as zones where stop losses are clustered.

Look for: a well-watched trendline; awareness of where stops sit (bulls place stops just below an upward trendline; bears just above a downward trendline); price approaching that cluster; a nearby level or fair value gap that aligns with your entry.
Entry: wait for price to dip into the stop-cluster area (just beyond the trendline), then enter in the direction of the overall trend as price reverses back.
Stop loss: below the fair value gap or level you entered at.
Target: the next swing high or structural level in the trend direction.

Key insight: markets routinely move to levels where stops are clustered, collect that liquidity, then resume the original trend. Recognizing these patterns gives you an edge.

Next module: Stops, Sizing & Risk Management →

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