Grading Your Setups A, B and C: How to Score Trades Before You Enter and Size Them in 2026
October 24, 2026
14 min read
Grading your setups A, B and C means scoring every trade idea against a short written list of criteria before you enter, then letting the grade decide whether you trade it and how big. An A setup meets every criterion on your list. A B setup meets most of them. A C setup meets few, or only looks like your setup if you squint. The grade is set before the order, not after the result.
Most traders already sense that some trades are better than others. The problem is that the sense arrives with the same size attached to every trade. The textbook setup at the key level gets the same position as the half-formed pattern taken out of boredom twenty minutes later. Over a week, the weaker trades quietly spend the gains the strong ones made.
In this guide we'll cover what grading setups A, B and C means, how to write criteria you can actually check in the moment, how a grade should change your position size, how to keep your grades honest when you are tempted to inflate them, and how grading fits the daily loss limit and trailing drawdown of a simulated funded account.
Key Takeaways
- Grade before you enter. A grade given after the trade is a judgment of the outcome. A grade given before the trade is a judgment of the decision, which is the part you control.
- Write criteria you can check. "At the prior day's high with volume above average" can be checked. "Looks strong" cannot. Use four to six observable criteria.
- Let the grade set the size. Full planned risk on A setups, a reduced amount on B setups, nothing on C setups.
- Track results by grade. Your journal will show whether your A setups really outperform. If they do not, your criteria need work.
- Spend your daily risk on your best ideas. In an account with a daily loss limit, every C trade you skip leaves more room for the A trade that comes later.
Table of Contents
- What does grading your setups A, B and C mean?
- How to write grading criteria you can check in real time
- How should a setup's grade change your position size?
- How to keep your setup grades honest
- Grading setups in a simulated funded account
What does grading your setups A, B and C mean?
Grading your setups is a pre-trade scoring system. You keep a written list of what your best version of a setup looks like, check each live opportunity against that list, and assign a letter: A for a full match, B for a partial match, C for a weak one. The letter then tells you what to do.
A, B and C in plain terms
An A setup is the trade you would show someone to explain your strategy. Every item on your list is present: the pattern, the location, the market context, the timing and a clear place to be wrong. These should be uncommon. If most of your trades are A setups, your bar is too low.
A B setup has the core pattern and most of the supporting conditions, but something is missing. Maybe the location is right but the broader market is working against it, or the timing is outside your best window. B setups can still be worth taking, at a smaller size.
A C setup resembles your strategy only on the surface. It is the trade you take because you have been watching the screen for an hour, because a stock is moving and you feel left out, or because the last trade lost and you want it back. C setups are usually not worth trading at all.
Why the grade comes before the trade
The order matters more than it looks. If you grade a trade after it closes, the result leaks into the grade. A winner suddenly looks like an A, and a loser looks like a C. That is outcome bias at work, and it teaches you the wrong lessons. Our guide to hindsight bias in your trading journal explains how a known result rewrites what you remember thinking at the time.
A grade written down before the order is a record of the decision itself. A well-graded A setup can lose, and a C setup can win. Over enough trades, what matters is whether the grades predict results. You can only find that out if the grade was set before the result existed.
What grading is not
Grading is not a prediction that a trade will win. It is a measure of how closely the trade matches the conditions your plan is built on. It also does not replace your other rules. An A setup still needs a stop, a size that fits your limits and a reason to exit. Grading decides which trades deserve your risk, not whether risk rules apply.
How to write grading criteria you can check in real time
Good grading criteria are specific, observable and few. Write four to six conditions that describe your best version of one setup, each one something you can confirm on the chart or the tape in a few seconds. If a criterion depends on how you feel, rewrite it or remove it.
Start from one setup, not your whole strategy
Grading works setup by setup. A breakout and a pullback have different ideal conditions, so each one gets its own list. If you trade five setups, that is five lists, which is a sign you might be trading too many. A smaller menu of setups is easier to grade honestly, because each list stays fresh in your mind.
For each setup, look back through your journal at the trades you are proudest of, the ones where the plan worked as designed. Write down what they had in common. Those shared conditions are the first draft of your A criteria.
Make every criterion observable
Here is the test: could another trader look at the same chart and agree whether the criterion is met? Some examples of criteria that pass and fail that test:
- Pattern: "Price breaks the morning range high after at least 30 minutes of consolidation" passes. "Clean breakout" fails, because clean means different things on different days.
- Location: "Within a few cents of the prior day's high or a level marked before the open" passes. "Near a key level" is too loose unless you marked the levels in advance.
- Context: "The index is trading above its opening price" passes. "The market feels bullish" fails.
- Timing: "Between 9:45 AM and 11:30 AM ET" passes, if that is the window where your journal shows the setup works best.
- Risk: "A logical stop sits close enough that the distance to the first target is at least twice the distance to the stop" passes. "Good risk-reward" fails.
- Tradability: "The spread is a small fraction of the planned stop distance" passes. It keeps you out of instruments where costs eat the edge.
Turn criteria into a grade
Once the list exists, the grade is a count. A common rule: all criteria met is an A, all but one is a B, anything less is a C. Some traders mark one or two criteria as required, so a trade with no logical stop can never be better than a C no matter what else it has.
| Grade | Criteria met (of 5) | Planned risk | What you do | What to note in the journal |
|---|---|---|---|---|
| A | 5 of 5, including the required ones | Full planned risk (1R) | Take it at full size, follow the plan exactly | Grade, entry, stop, exit, whether you followed the plan |
| B | 4 of 5, required ones present | Reduced risk, such as half (0.5R) | Take it smaller, or wait for the missing condition to appear | Which criterion was missing and whether it mattered |
| C | 3 or fewer, or a required one missing | None | Skip it. Write it down as a trade you passed on | What made it tempting, so you can spot the pattern |
One way to map grades to action. The exact sizes are yours to set, but the principle holds: the weaker the match, the less risk the trade gets.
How should a setup's grade change your position size?
Your grade should set your risk. Give A setups your full planned risk per trade, give B setups a reduced amount, often half, and give C setups nothing. This puts the most money behind the trades most likely to match your edge, and the least behind the ones that do not.
Define 1R first
Grading by size only works if you know what full size means. Call your full planned risk per trade 1R, a fixed dollar amount you are willing to lose if the stop is hit. Position size then comes from dividing 1R by the distance between your entry and your stop.
Remember that a stop price is a trigger, not a promise. The SEC's Investor Bulletin on stop, stop-limit and trailing stop orders explains that a stop order becomes a market order once triggered, and the price you receive can deviate significantly from the stop price. In live markets your real loss on a stopped trade can be larger than 1R, so leave a buffer when you set the number.
Grading your setups
Grade first, then size
The grade is set before the order. It decides how much of your planned risk the trade is allowed to use.
How the grade sets risk (1R = $150)
Full match
5 of 5 criteria, required ones included
Partial match
4 of 5 criteria, one condition missing
Looks like it, isn't it
3 or fewer, or a required one missing
One illustrative session: nine setups seen
All nine at full size
$1,350
Planned risk committed: 9 trades x $150
Trading by grade
$525
2 A x $150 + 3 B x $75. Four C setups skipped
tradefundrr.comIllustrative example. The 1R figure, the criteria counts and the session are hypothetical and show the arithmetic of grading, not a typical or expected result.
Why sizing by grade matters more than picking trades
Consider the illustrative session in the infographic. A trader sees nine opportunities in a morning: two A setups, three B setups and four C setups. Taken at full size, all nine commit $1,350 of planned risk. Traded by grade, the same morning commits $525, with every dollar behind a setup that meets most or all of the plan.
The difference is not just the total. It is where the risk sits. Without grading, 44% of the morning's risk sits on C setups, the trades least connected to the strategy. With grading, none of it does. If the trader's edge lives mainly in A setups, grading puts the money where the edge is.
B setups: smaller, or patient
A B setup gives you two honest choices. You can take it at reduced size and accept that it is a lesser trade. Or you can wait for the missing criterion to appear, at which point it becomes an A. A pullback that has not yet reached your level is a B now and might be an A in ten minutes. Waiting turns some B setups into A setups and lets others pass by without costing you anything.
C setups: the trade you log, not the trade you take
Skipping a C setup feels like doing nothing. It is actually a decision, and it should be recorded like one. Note the time, the setup and what made it tempting. Over a few weeks, those notes will show you when C setups show up for you, whether after a loss, late in the session or during slow markets. That pattern is often more useful than any single trade.
How to keep your setup grades honest
Keep grades honest by writing them down before you enter, reviewing them against results every week, and adjusting your criteria rather than your grades when the two disagree. The most common failure is grade inflation: marking a B as an A because you want to trade it at full size.
Grade inflation and how to catch it
Grade inflation happens quietly. You want the trade, so the missing criterion starts to look present. The market is "basically" above the open. The spread is "close enough." By the end of the week, half your trades are A setups, and your A setups perform no better than your old average.
Two habits catch it. First, write the grade and the list of criteria met in your journal before you place the order, not after. Second, count your grades each week. If A setups are more than a small share of what you trade, look at the ones that lost and check whether every criterion was really there. Our guide on why a trading journal is your edge covers how to record trades so these questions can be answered later.
Check whether your grades predict anything
The point of grading is that A setups should do better than B setups, and B setups better than C setups. After 30 or more graded trades, sort your journal by grade and compare the average result in R for each group. If your A setups outperform, the criteria are working. If all three groups look the same, your criteria describe something other than your edge, and they need rewriting.
That is a damaging admission worth making to yourself. A grading system that does not separate results is just a ritual. The value comes from testing it against your own record and changing it when the record says so.
Emotions push grades up
Fast markets make honest grading harder. In an article on Investor.gov about the risks of day trading, the SEC's former head of investor education notes that day trading involves minute-to-minute decision-making and that it can be especially difficult to check your emotions at the door in that environment. A written grade is a way to make one decision in a calmer state and hold yourself to it when the screen gets busy.
- Write a separate list of four to six criteria for each setup you trade.
- Make every criterion something another trader could check on the same chart.
- Mark one or two criteria as required, such as a logical stop.
- Define 1R in dollars before the session, with a buffer for slippage in live markets.
- Grade the trade and note which criteria are met before you place the order.
- Size by grade: full risk for A, reduced for B, none for C.
- Log every C setup you skip, with the time and what made it tempting.
- Every week, count your grades and compare average results in R by grade.
Grading setups in a simulated funded account
In a TradeFundrr account, grading matters because the daily loss limit and trailing drawdown are fixed in dollars. Every dollar of risk spent on a C setup is a dollar that is no longer available for an A setup later in the session or later in the week.
The limits are a budget
TradeFundrr's stock and options accounts carry a daily loss limit that pauses trading for the rest of the session when it is reached, and a $3,000 maximum drawdown that trails your highest end-of-day balance and closes the account if it is reached. On the options accounts, the daily loss limit is $1,000. Position limits also apply, set by program and account size, so confirm the current figures in your own account terms.
Illustrative example: on an options account with a $1,000 daily loss limit, a trader sets 1R at $150. A morning of C setups taken at full size, each one stopped out, could use most of that daily limit before the A setup the trader was waiting for even appears. By the time it does, the session might already be paused. Grading protects your ability to take the trades you actually want.
Grading and the evaluation requirement
TradeFundrr's Pre-Prop accounts are simulated evaluation accounts. On both the stock and options programs, passing requires five profitable days of at least $250 net profit each, with no time limit. Prop is a simulated funded account with no evaluation, and payout eligibility has its own written requirements, so check the current terms in your account rules.
A requirement built on profitable days rewards steady sessions more than busy ones. A day where you take two A setups and skip six C setups can be a cleaner path to a qualifying day than a day of constant trading. Our guide to the overtrading trap covers how activity can feel like progress while quietly eating the account's limits.
Why practice grading in a simulated environment
Grading is a habit, and habits are easiest to build where mistakes are affordable. A simulated account lets you grade every setup, size by grade and check the results against your journal without risking your own savings on the learning curve. The skill transfers anywhere you trade, because the question it asks is the same everywhere: does this trade deserve my risk?
Frequently Asked Questions
What is an A+ setup in trading?
An A+ or A setup is a trade that meets every condition on your written criteria list for that setup, such as the right pattern, location, market context, timing and a clear stop. It is the version of the trade your strategy is built around, and it should be relatively uncommon.
How do you grade trading setups?
Write four to six observable criteria for each setup, check a live opportunity against them before you enter, and count how many are met. A common rule is all criteria for an A, all but one for a B and fewer for a C, with some criteria marked as required.
Should I trade B setups?
You can, at reduced size, or you can wait for the missing condition to appear and turn it into an A. Many traders give B setups half their normal risk. Your journal should tell you over time whether B setups are worth taking at all.
How should I size trades by setup grade?
Define your full planned risk per trade as 1R, then give A setups 1R, B setups a reduced amount such as 0.5R, and C setups nothing. Position size comes from dividing that dollar risk by the distance between entry and stop.
Does grading setups help in a funded account?
Yes. A funded account's daily loss limit and trailing drawdown are fixed in dollars, so risk spent on weak setups is no longer available for strong ones. Grading keeps more of that budget for the trades that best match your plan.
How much can I lose in a day in a TradeFundrr options account?
The options accounts carry a $1,000 daily loss limit that pauses trading for the rest of the session when reached, and a $3,000 maximum drawdown that trails the highest end-of-day balance and closes the account if reached. Confirm current figures in your account terms.
Will trading only A setups help me pass a TradeFundrr evaluation?
No method guarantees a pass. Passing Pre-Prop requires five profitable days of at least $250 net each, with no time limit. Trading fewer, better-graded setups can make your days more consistent and protect your limits, but results depend on your trading.
How many setups should I grade?
Grade every opportunity you seriously consider, including the ones you skip. Logging the C setups you pass on is as useful as recording the trades you take, because it shows when and why weak trades tempt you.
Grading your setups is a simple idea that changes how a session feels. Instead of asking "should I take this?" a dozen times a morning, you ask "what grade is this?" and let a decision you made in advance answer the rest.
Start small. Pick your most common setup, write five criteria, define 1R and grade every opportunity for two weeks. Then look at the results by grade. If your A setups earn their name, you have found where your edge lives. If they do not, you have learned something worth more than any single trade.
Spend your limits on your best setups
TradeFundrr's simulated stock and options accounts publish the daily loss limit and trailing drawdown up front, so you can size every grade against limits you know before the session starts.
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