Built For
Instruments: Stocks/Options/Futures/Forex
Trading Style: Scalping/Day Trading/Swing Trading
Strategy Overview
This playbook is built on one principle: A trade is valid only when there is a clear and logical story behind it.
This story begins with liquidity, is confirmed by market behavior, and is executed only after price pulls back into a high-quality area.
The playbook applies to any market (stocks, futures, crypto, forex), any timeframe, and any trading style because it is based on how markets naturally move: they seek liquidity, create displacement, retrace, and continue.
A complete story contains three core components:
Liquidity Catalyst — something meaningful happens
This is the moment the market reveals information.
It may be:
- A sweep of equal highs/lows
- A break of a major support/resistance zone
- A break of a well-respected trendline
- A market structure shift (breaking the prior high/low of the trend)
- A sharp rejection from a significant level
A liquidity catalyst tells you the market has just changed behavior. Before this moment, the chart offers no reliable direction.
Displacement — the market reacts with strength
After the catalyst, you want to see a decisive move away from that area. This confirms that the liquidity interaction mattered.
This move creates:
- Clear direction
- A break in the previous trend
- A new range or swing structure
- A reason to expect a pullback
Without meaningful displacement, there is no evidence that the market intends to move.
Retracement Into a Logical Area — the actual entry
The first move after a catalyst is rarely the entry. It is the reaction. You enter on the retracement.
The retracement may return to:
- A broken support/resistance level
- A retested trendline
- A fair value gap
- An order block
- A moving average used as dynamic support/resistance
The retracement gives:
- A controlled stop placement
- A better risk-to-reward profile
- A clear invalidation point
- A calmer entry compared to chasing momentum
When price returns to this area with confluence, the trade becomes valid.
Strategy RULES
These rules outline exactly how to apply the Universal Playbook with consistency and precision.
No Liquidity Catalyst, No Trade
A trade only begins when price interacts with a major liquidity level in a meaningful way.
If the market is moving quietly with no sweep, break, or structural disruption, there is no valid setup. You wait until the market gives you a clear catalyst.
A Strong Reaction Must Follow the Catalyst
A sweep, break, or test of liquidity means nothing unless the market shows decisive follow-through. You must see evidence that the catalyst mattered. This often appears as:
- Clear displacement
- A noticeable shift in price behavior
- A break in the prior swing structure
Without this reaction, the market has not committed to a direction, and the story is incomplete.
Entries Are Taken Only on the Retracement
You do not enter during the first impulsive move away from liquidity. The initial reaction is where volatility is high, and traders are trapped.
A valid entry occurs only when the price retraces into a logical zone, such as:
- A broken support or resistance level
- A fair value gap
- A previous swing level
- A trendline retest
If the price continues without offering a retracement, the setup does not qualify. Your job is to wait for the trade — not to chase it.
Invalidation Must Be Clear and Objective
Every valid trade has a precise point where the story fails. Your stop must sit beyond the level that proves the narrative wrong. If that level breaks, the trade is invalid, and you exit without hesitation.
- No wide stops out of fear
- No arbitrary “breathing room.”
- No stops based on option pricing
Stops are always defined by price structure, nothing else.
A Trade Requires Technical and/or Fundamental Confluence
No trade is taken based on a single signal. A complete story must be supported by multiple factors working together.
Confluence may include:
- Key support/resistance
- Structure shift
- Trendline break
- Divergence
- Higher-timeframe alignment
- Macro conditions, seasonality, or significant news
When several elements point in the same direction, the trade idea becomes valid.
Missing a Trade Is Not a Mistake
If your retracement zone is never reached, the market did not fulfill your criteria.
You do not chase. You do not adjust the entry out of fear of missing out. You simply move on.
A trade that violates your rules is far more damaging than a trade you never took.
Manage the Trade According to the Story, Not Emotion
Your profit targets should align with the narrative, typically focusing on:
- Liquidity pools
- Prior highs or lows
- Imbalance fills
- Areas where traders are trapped or forced to act
Markets move from one liquidity zone to the next.
Your exits should reflect that logic — not impulse, fear, or the desire to “protect” profits prematurely.
You allow the story to play out, and you exit when your narrative says the move is complete.
Pros and Cons of the Strategy
This playbook is designed to deliver high-quality, repeatable setups — but like any trading strategy, there are key things to understand before using it.
Note: The cons listed here aren’t disadvantages. They are things to be aware of — important characteristics that require patience, discipline, and proper management to make the strategy work effectively.
Swing Trading — Pros and Cons
Pros
- More Deliberate Decision-Making: Swing trading gives you time to analyze the chart calmly. You can build a complete narrative using higher timeframes, liquidity, and fundamentals without rushing.
- Less Emotional Pressure: Swing trades do not activate the constant “fight-or-flight” response that day trading often triggers. This reduced stress helps traders avoid impulsive decisions.
- Easier to See the Bigger Picture: Higher-timeframe structure is cleaner and more reliable. Liquidity levels, trend strength, and macro conditions are easier to interpret.
- Works Well with Fundamental Context: Seasonality, macro events, drawdown levels, and major market cycles all support swing trades. You can combine technical and fundamental storytelling effectively.
- Less Temptation to Overtrade: Because swings take time to form, you cannot take 10 trades in a single day. This naturally limits the amount of impulsive entries.
Cons
- No Control Over After-Hours Price Movement: Stocks and options can gap overnight. Price may open far beyond your intended stop, which increases risk.
- Options Pricing Is Not Exact: Greeks, implied volatility, and time decay distort the P&L. Your stop and target must be based on the underlying chart, not the option premium.
- Holding Period Creates Uncertainty: Because trades last days or weeks, traders may overthink or exit too early.
- Story Can Change Slowly, but Significantly: Macro news, political events, or unexpected headlines can affect swing trades even when the technical story is valid.
Day Trading — Pros and Cons
Pros
- No Overnight Risk: Positions are closed before the market shuts, so you avoid overnight gaps and unexpected news.
- Frequent Opportunities: Intraday liquidity sweeps, structure shifts, and reactions occur often. This provides many chances to apply the Universal Playbook.
- Immediate Feedback: You see quickly whether your story is correct.This speeds up learning when executed with discipline.
- Clear Interaction With Intraday Liquidity: The market sweeps highs/lows, manipulates levels, and displaces aggressively within a single session — ideal behavior for this framework.
Cons
- Requires Rapid Story-Building: You must identify liquidity, confirm displacement, and plan the retracement in minutes — sometimes seconds. This is difficult for newer traders.
- High Emotional Pressure: The brain remains in a survival state during fast price movements. This increases the likelihood of panic exits, revenge trading, or overtrading.
- Easier to Take “Lookalike” Trades: Many intraday moves mimic real setups but lack higher-timeframe context. Beginners often mistake these for valid trades.
- Mistakes Compound Quickly: A single session can contain several losing trades if discipline slips. This makes emotional control critical.
- Lower Timeframes Add Noise: Without higher-timeframe context, lower-timeframe setups often fail. The story becomes harder to see, making execution inconsistent.
Trade Breakdown
S&P 500 Trendline Break & Retest
Context
The S&P 500 was in a clear post-election uptrend, respecting a well-defined trendline. While the trend held, there was no trade.
Liquidity Catalyst
Price broke the trendline that had acted as structural support. This break signaled a change in market behavior and initiated the trade narrative.
Reaction
After the break, the price showed bearish follow-through and lost the most recent higher low. This confirmed a market structure shift and validated the catalyst.
Entry
Price retraced back toward the broken trendline. The 21 EMA aligned with the retest, creating a confluence zone where former support and dynamic resistance overlapped. A short was taken at this retracement.
Invalidation
The trade was invalid if the price reclaimed the trendline and held above the 21 EMA.
Targets
Targets were set at prior internal lows and lower liquidity levels.
Execution Logic
Liquidity was broken, structure shifted, price retraced into the trendline + 21 EMA resistance, and the trade was executed from that zone.
