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What is a setup?

 

A setup price serves as an alarm for traders, notifying them that the stock in question has reached a price point and trend that fall within the trading strategy.  In addition to being the alarm, the setup price also can refer to the price at which a trader is willing to take a position with that particular stock.

 

Setup prices are solely at the discretion of the trader and his/her corresponding trading strategy.  For example, if a trader believes that a stock will continue to rise, her setup price will give her the opportunity to purchase that stock at the outset of that rise, giving her the opportunity to make a profit as the stock price continues to increase.