Setup Price

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.

BREAKING DOWN '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. Technical Rally

    An upward movement in a security's price following a declining ...
  2. Selling Into Strength

    A proactive trading strategy carried out by selling out of a ...
  3. Buy Weakness

    A proactive trading strategy in which a trader takes profits ...
  4. Opening Range

    The highest and lowest prices of a security during the first ...
  5. Trade Price Response

    The setting up of a trade which is based upon what the price ...
  6. Set-Up Hedge

    An arbitrage strategy involving a long position in a convertible ...
Related Articles
  1. Options & Futures

    Stop Hunting With The Big Forex Players

    Learn to bank short-term profits by placing stops away from the crowd.
  2. Investing Basics

    Day Trading Strategies

    Day trading is the term often used for buying and selling stocks within the same day. Day traders seek to make a profit by leveraging large amounts of capital in order to take advantage of small ...
  3. Trading Strategies

    Profit Without Predicting The Market

    Traders who try to predict the future can actually harm their trading options.
  4. Forex Education

    Using Double Tops And Double Bottoms In Currency Trading

    Find out how to apply the two most common price reversal patterns to your trading.
  5. Trading Systems & Software

    Use Price Action Trading Strategy for Results

    Bored by the fixed rules of technical and fundamental analysis? Price action trading allows you to customize your own trading strategy.
  6. Trading Strategies

    An Introduction To Price Action Trading Strategies

    For traders who want a mix of technical analysis with their own control in decisions, price action trading offers the perfect fit. Here's how it works.
  7. Professionals

    A Day In The Life Of A Day Trader

    Day trading has many advantages and, while we often hear about these perks, it's important to realize that day trading is hard work.
  8. Chart Advisor

    Uptrend and Downtrend Trade Setups (ERIC, KIM, XYL)

    Here are current trade setups for buying or selling, and a couple stocks that could see a big move either way.
  9. Investing Basics

    What Type Of Trader Are You?

    There are different ways stock traders attempt to profit from market movements. Which of the strategies do you use?
  10. Trading Strategies

    One Thing To Consider After An Uptrend

    A breakdown at support could eventually yield a profitable trading opportunity in the opposite direction.
RELATED FAQS
  1. How do traders identify confirmation of prices on a chart?

    Learn about some of the crucial tools that traders can use to confirm their price movements on a chart before entering or ... Read Answer >>
  2. What types of data are necessary to make a technical analysis?

    Understand what technical analysis is, the basic theory behind employing it and what data inputs are needed to conduct it. Read Answer >>
  3. Why is the Ease Of Movement Indicator important for traders and analysts?

    Read more about the ease of movement indicator, a technical momentum oscillator created by Richard Arms to track price changes ... Read Answer >>
  4. With what kinds of securities does it make the most sense to enter a long position?

    Find out which securities provide the best opportunities for entering long positions, including how this strategy is used ... Read Answer >>
  5. What is the difference between investing and trading?

    Investing and trading are two very different methods of attempting to profit in the financial markets. The goal of investing ... Read Answer >>
  6. How do traders implement the Buy a Bounce Strategy?

    Learn how traders execute the buy a bounce strategy for a security that has reached an important support level. Find out ... Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. 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 ...
Trading Center