Setup Price

AAA

DEFINITION of 'Setup Price'

A price level predetermined as the point of entry into a specific security, stock, or currency. Once the setup price is broken the trader will enter the position determined by the setup. This could include shorting a stock because they think the price will drop or going long because they expect an upward movement.

INVESTOPEDIA EXPLAINS 'Setup Price'

The setup price can be determined based on technical or fundamental factors as well as personal opinion on the part of the trader. Usually reaching the setup price is not enough to make a move. Generally traders wait for a significant break to confirm the trend will continue.

For example, if you're looking for the price of a stock to go above $25 before buying, the setup price is $25. It might be better for the price to exceed $25.05 instead of purchasing as soon as $25 is reached. Timing will depend on volume, volatility and many other factors affecting price movements.

RELATED TERMS
  1. Indicator

    Indicators are statistics used to measure current conditions ...
  2. Trend

    The general direction of a market or of the price of an asset. ...
  3. Momentum

    The rate of acceleration of a security's price or volume. The ...
  4. Volume Price Trend Indicator - ...

    A technical indicator consisting of a cumulative volume line ...
  5. Technical Indicator

    Any class of metrics whose value is derived from generic price ...
  6. Trading Range

    The spread between the high and low prices traded during a period ...
RELATED FAQS
  1. What does it mean to take delivery of a derivative contract?

    When trading derivative contracts for options, a buyer or holder may have to take delivery of the underlying asset if the ... Read Full Answer >>
  2. What does the notional principal of a derivative contract refer to?

    The notional principal amount of a derivative refers to the nominal, or predetermined, value used to calculate payments made ... Read Full Answer >>
  3. How can derivatives be used for speculation?

    Derivative securities could be bought or sold to speculate on the future price of the underlying assets. Derivative securities' ... Read Full Answer >>
  4. What does it mean when I get a Fed margin call?

    Understanding fed margin calls and how they affect your trading account is part of investing basics. A margin account allows ... Read Full Answer >>
  5. What does it mean to roll a derivative contract?

    A derivative is a financial instrument in which the price of the derivative is dependent on an underlying asset. A derivative ... Read Full Answer >>
  6. What is affected by the interest rate risk?

    Interest rate risk is the risk that arises when the absolute level of interest rates fluctuate. Interest rate risk directly ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    Scalping: Small Quick Profits Can Add Up

    We look at different styles of scalping, and how they can all be very profitable.
  2. Forex Education

    The "Turn To The Carry" Trade

    This variation on the turn to trend setup can help longer term traders make more potent trades.
  3. Forex Education

    "Do The Right Thing" For Trade Breakouts

    Often in life, the right action is the hardest to take. Discover how to get on the right side of a trend.
  4. Forex Education

    Find Forex Profit With The RSI Rollercoaster

    This high-reward setup will provide plenty of ups and downs before a big climb.
  5. Retirement

    Are You A Disciplined Investor?

    Don't let "financial porn" steer you away from a sensible, long-term approach to investing.
  6. Options & Futures

    An Option Strategy for Trading Market Bottoms

    The reverse calendar spreads offers a low-risk trading setup that has profit potential in both directions.
  7. Technical Indicators

    6 Stocks for Millennials (or Anyone)

    Savvy Millennial investors looking for long-term winners should take a look at these stocks.
  8. Chart Advisor

    Long-Term Charts Suggest The Next Move Is Downward

    It is often a strategic move to remove oneself from the daily fluctuations and to broaden the time horizon to get a better idea of the long-term trend.
  9. Chart Advisor

    Silver Stocks Facing Major Resistance

    Active traders in the commodity markets are taking note of silver.
  10. Investing Basics

    Understanding Open-End Funds

    An open-end fund is a type of mutual fund that does not limit the amount of shares it issues, but issues as many shares as investors are willing to buy.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center