In the high-stakes environment of proprietary trading, your profitability is not determined by the number of trades you take, but by the quality of the trades you take. An A+ setup is a trade that has multiple, independent factors aligning in its favor, creating a high-probability, asymmetrical opportunity. Mediocre setups, on the other hand, bleed your account and your mental capital.

To ensure you are only deploying the firm's capital on the best possible opportunities, you need a systematic filtering process. This checklist is your filter. By running every potential trade through these five criteria, you can dramatically increase your consistency and focus your efforts on the setups that truly matter. Do not proceed with a trade unless you can confidently check all five boxes.

1. Is the Higher Timeframe Trend in My Favor?

This is the most important question you can ask. Fighting the dominant trend is a losing game. Before you even look for an entry, you must establish the path of least resistance on the weekly and daily charts.

• For a long trade: Is the market making clear higher highs and higher lows on the daily chart? Is it trading above key moving averages like the 50 and 200 EMA?
  
  

• For a short trade: Is the market making clear lower highs and lower lows? Is it trading below its key moving averages?

If the answer is no, or if the market is stuck in a sideways range, the setup is immediately disqualified. An A+ setup is one that flows with the primary market current, not one that tries to swim against it.

2. Is the Trade Occurring at a Key Price Level?

The best trades originate from significant price levels where a reaction is expected. A random entry in the middle of a price leg is a low-probability guess. Your setup must be anchored to a major point of confluence on the chart.

Look for at least two of the following to align:

• A major horizontal support or resistance level.

  
  

• A clear supply or demand zone on the daily or 4-hour chart.

  
  

• A key Fibonacci retracement level (e.g., 61.8%).
  
  

• A retest of a broken trendline or previous market structure.

When multiple technical factors converge at one price, it signals a "hot spot" where a reversal or continuation is highly probable.

3. Is There a Clear and Logical Invalidation Point?

If you cannot immediately identify where your trade idea is proven wrong, you do not have a trade. Your stop-loss placement cannot be arbitrary; it must be tied to the market structure that underpins your thesis.

• For a long trade: Is there a clear swing low below your entry point? Placing your stop below this low invalidates the bullish structure.
  
  

• For a short trade: Is there a clear swing high above your entry? A stop above this level invalidates the bearish structure.

This structural stop-loss defines your risk (your "1R") and ensures you are only taken out of the trade if the technical reason for entering is no longer valid.

4. Does the Market Have Sufficient Room to Run?

An A+ setup requires not just a good entry, but a clear path to a profitable exit. Before entering, you must look to the left on the chart and assess the profit potential.

• Is there significant "empty space" for the price to move into before it hits the next major obstacle (e.g., a major supply zone or resistance level)?

  
  

• Does the distance to that first major obstacle provide at least a 3:1 risk/reward ratio based on your structural stop-loss?

If the path to profit is cluttered with minor resistance or the potential reward is small, the trade is not worth the risk. The goal is to find trades with the potential for asymmetrical returns, a topic we explore in our guide to Hunting for10R Trades.

5. Is There a Clear Entry Trigger?

Finally, you need a specific event to signal that it's time to execute. A setup is just a point of interest until the market confirms your thesis with price action. This trigger prevents you from entering too early.

Your trigger could be:

• A strong candlestick reversal pattern (e.g., a bullish engulfing candle at support).
  
  

• A break and retest of a smaller pattern on a lower timeframe (e.g., a 1-hour trendline break).
  
  

• A crossover of short-term moving averages in the direction of your trade.

This final confirmation is your green light. Once you have it, and all four other boxes are checked, you have identified an A+ setup worthy of your capital. Now, your focus can shift to managing it correctly, as detailed in ourSwing Trading Masterclass.