The 3rd Touch setup is characterized by 3 important pivots.
The guidelines for entering this setup are very clear with a well-defined stop loss.
Therefore, the risk is very low while the reward can be exponential.
Time Stamps
0:26 - UTILITY
- Three important pivots:
- first important low/high.
- SFP/FA of pivot 1.
- Retest of pivot 1.
- On the SFP/FA you want to see lots of trapped longs / High Volume (guideline).
- You want to see bearish/bullish CVD on the retest (guideline).
- Perfect if the 1st high made is a KEY level.
2:41 - IMPLEMENTATION
- Price tests the previous high before the SFP or FA.
- Price rejects from the secondary test of the first high.
- Trade setup:
- Entry after seeing the rejection, preferably with bearish CVD divergences.
- Take profit will be context dependant. Could use range POC, range VAL, CC, etc. for TP1.
- Invalidation (SL) above the high made (SFP).
- Acceptance into VAH after the 3rd rejection is very positive for this setup to play out.
- Bear market context:
- Don’t be scared to take a valid long setup.
- Adjust your TP accordingly. TP1 should be faster such as intraday Session VWAP or the last high made on a 1/5 minute chart.
6:22 - TIPS AND TRICKS
- On the SFP/FA we would like to see many trapped traders / High Volume.
- After the test of the original pivot and visual rejection can be seen, one can wait for a LTF MS change to confirm short/long entry.
- Trade works best at Key levels of support and resistance.
- If this setup gets invalidated or stopped out we can quickly adjust to look for a 3 Drives Pattern or another SFP / FA of the previous high.
- On the retest of the 1st pivot, it would be nice if that is also on confluence with the POC of the SFP candle.