L5.1 — Grading Your Setups: A Quality Framework

Not all setups that meet your criteria are equal. A grading framework allows you to distinguish between high-quality and marginal setups and size your risk accordingly — or skip the marginal ones entirely. A simple three-tier framework: A-grade (multiple confluences, clean structure, strong confirmation), B-grade (clear setup but only one or two confluences), C-grade (technically valid but weak context).

The practical application: full risk on A-grade setups, reduced risk on B-grade, skip C-grade entirely. This is not a rigid formula — it is a discipline tool that prevents you from treating all valid setups as interchangeable. A setup that barely qualifies is not worth the same risk as one that strongly qualifies.

Grading requires honest self-assessment. The tendency is to retroactively upgrade the grade of a trade you want to take. Counter this by grading before you look at the potential reward — assess the quality of the setup independently of how attractive the target looks.