Creating your Playbook of Setups
Developing a Trading Playbook is the Key to Consistent Success in Price Action Trading
Traders shouldn’t try to trade every twist and turn in the market - it’s a sure recipe for disaster. I know - it’s what much of my trading past consisted of! It took me a lot of pain and hurt to finally admit defeat and do the right thing which was to treat trading like a business and write a game plan, a part of which meant developing a playbook of my trading setups.
A playbook helps keeps you on the straight and narrow, helping you trade with discipline and precision. A trading playbook is vital for success.
So what is a Trading Playbook?
A trading playbook is a personalized, documented set of rules and strategies that guide your trading decisions. You find a setup you like, and add it to your Playbook. It’s a detailed guide that outlines how you identify setups, enter trades, manage risk, and exit positions based on Price Action principles. You develop your playbook over time, starting with either one or a few trade setups to begin with.
Your Playbook keeps you out of the market when you shouldn’t be in the market,
and puts you in the market when the right conditions appear.
Your playbook should include:
Specific Trade Setups: Define the Price Action patterns you trade, such as trend pullbacks, reversals, or breakout failures. For example, you might focus on a two-legged pullback in a strong trend or a double top/bottom at a key support/resistance level.
Entry Criteria: Clearly state what confirms a trade, like a strong close beyond a trendline or a breakout with follow-through.
Risk Management Rules: Specify your stop-loss placement, position sizing, and risk-reward ratios (e.g., aiming for at least a 2:1 reward-to-risk ratio, as Brooks often emphasizes).
Trade Management: Detail when to add to the trade or take profits, whether at a measured move target, a key level, or based on signs of trend exhaustion.
Market Conditions: Note which market environments suit your setups, such as trending markets versus ranges, and how to adapt when conditions change.
Review Process: Include a routine for analysing trades to refine your edge over time.
This is an example of one of my Playbooks. The setup is described along with setup grading which helps me decide on trade sizing. For example if it’s a B grade setup, then I’m not going in full size.
I include images of the perfect setup so it’s very clear what a perfect setup looks like. Going through this process for each possible trade setup I could take really helped my trading because it instils in your mind discipline and process. Before it was all shooting from the hip which was disastrous.
You should ideally add additional sheets to record what actually happened in your trade and keep these as your trading record in digital. These are then used for your daily recap and weekend reviews - which of course you are doing - aren’t you!
If you sign up for my newsletter, I’ll send you the PowerPoint copy of this particular Playbook which you can then modify for your own use and to create your own Playbook of setups. Of course it’s easy enough to create your own. I find PowerPoint best for this, Word works as well - or Canva.
Why a Trading Playbook is Important
To put it poetically, a trading playbook is your anchor in the chaotic sea of the markets! So here’s why it’s indispensable for Price Action traders:
Clarity in Decision-Making: Price Action trading as taught by Al Brooks, requires interpreting subtle market cues like bar patterns and context. A playbook provides a clear framework to filter noise and focus on high-probability setups, preventing impulsive trades based on emotion or indecision.
Discipline Over Emotion: Trading is a psychological battle. Fear, greed, and overconfidence can derail even the most skilled traders. A playbook enforces discipline by giving you predefined rules to follow, reducing the temptation to chase trades or deviate from your strategy during volatile moments.
Adaptability with Structure: While Price Action trading thrives on reading dynamic market behaviour, a playbook ensures you adapt systematically. For instance, Brooks emphasizes context—whether the market is trending or ranging. Your playbook can outline how to switch between aggressive entries in trends and conservative ones in ranges.
Measurable Progress: A playbook allows you to track your performance against specific criteria. By reviewing trades against your rules, you can identify strengths, weaknesses, and areas for improvement, which is critical for long-term growth.
Edge Development: Price Action Trading methodology is about finding an edge through consistent application of Price Action principles. A playbook helps you refine that edge by documenting what works and what doesn’t, ensuring you’re not relying on luck but on a repeatable process.
Why Traders Fail Without a Playbook
Without a trading playbook, traders are like sailors navigating stormy seas without a map. Here are the key reasons traders fail when they lack this critical tool and what I can personally attest to based on my own trading experiences:
Inconsistent Decision-Making: Without clear rules, traders often make decisions based on fleeting emotions or incomplete analysis. For example, they might enter a trade on a weak breakout signal, ignoring Brooks’ advice to wait for confirmation, leading to frequent losses.
Overtrading: A lack of defined setups leads to taking every perceived opportunity, diluting focus and capital. Price Action trading requires patience to wait for high-probability setups, like a strong reversal bar at a major level. Without a playbook, traders often overtrade in low-probability scenarios.
Poor Risk Management: Failing to define stop-loss levels or position sizes can result in catastrophic losses. Brooks emphasizes tight risk management to survive inevitable losing streaks. Without a playbook, traders may risk too much on a single trade, wiping out their accounts.
Inability to Learn from Mistakes: Without a documented strategy, it’s hard to pinpoint why trades fail. A playbook provides a benchmark to review trades, helping you understand whether losses stem from poor execution or market conditions outside your strategy’s scope.
Lack of Confidence: Trading without a playbook breeds uncertainty. When markets move fast, hesitation or second-guessing can lead to missed opportunities or poorly timed entries. A playbook builds confidence by giving you a tested framework to rely on.
The Role of Consistency
Consistency is the glue that holds a trading playbook together and transforms it into a tool for profitability. In Price Action trading, consistency isn’t just about sticking to your rules—it’s about applying them repeatedly to build a statistical edge. It’s about exploiting small edges over thousands of trades, not from hitting home runs.
Here’s why consistency matters:
Reinforces Discipline: Consistently following your playbook trains your mind to trust your process, even during drawdowns. For example, if your playbook calls for exiting a trade when a reversal bar forms against your position, doing so every time builds discipline.
Compounds Small Wins: Price Action trading often involves small, high-probability trades that add up over time. Consistent execution of your playbook ensures you capture these wins while minimizing losses, leading to steady account growth.
Adapts to Market Changes: Markets evolve, and so must your playbook. Consistent review and refinement—say, weekly analysis of your trades—help you adjust to new patterns, like shifts in volatility or trend strength, while staying true to Price Action principles.
Builds Mental Resilience: Trading is mentally taxing, especially when losses pile up. Consistently sticking to your playbook, even after a string of losses, reinforces the mindset that losses are part of the process and keeps you focused on long-term profitability.
How to Build Your Trading Playbook
Creating a trading playbook of trading setups is straightforward but requires consistent applied effort:
Study Price Action: Deeply understand Brooks’ concepts—trend analysis, support/resistance, and bar-by-bar reading. Identify setups that resonate with you, like trading pullbacks in a strong trend or scalping reversals in a range.
Define Your Rules: Write down specific criteria for entries, exits, and risk management. For example: “Enter a long trade on a strong bull trend bar closing above a key resistance level, with a stop below the bar’s low and a target at the next major resistance.”
Test and Refine: Back test your setups on historical charts and demo trade to validate them. Adjust your playbook based on what delivers consistent results.
Document and Review: Keep your playbook accessible—whether in a notebook or digital format—and review it daily before trading. After each session, analyse your trades against your rules to identify deviations or areas for improvement.
Stay Disciplined: Commit to following your playbook for at least 100 trades before making major changes. This builds consistency and trust in your system.
In Summary
A trading playbook is the cornerstone of success for Price Action traders. It provides clarity, enforces discipline, and fosters consistency, turning what seem like chaotic market movements into opportunities for profit. Trust me when I say that without a playbook, traders risk falling into the traps of overtrading, poor risk management, and emotional decision-making, which lead to failure.
By developing and consistently applying a well-crafted playbook, you can master the art of Price Action trading, build confidence, and achieve the consistent profitability that every trader seeks. So start building your playbook straight away, it really is your first step toward trading like a pro.