A setup is a rule, not a feeling. Learn to define one precisely and judge it by its measured base rate.
A trading setup is a set of conditions written down precisely enough that two people looking at the same chart would agree it either fired or it didn't. “It looked strong” is not a setup; “close above the 20-day range on volume > 2× the 50-day average” is.
The moment a setup is a rule, you can measure it: take every time those conditions were true in history and look at what happened next. That distribution — the base rate — is the only honest answer to “does this work?” A gut call has no base rate, so it can’t be improved.
A base rate is a historical frequency: “after this setup, price closed higher 5 days later 43% of the time, median −0.7%.” It is a record, not a prediction, and it says nothing about any single future trade. But across many trades it is the edge — or the lack of one.
Win rate alone is a trap. A setup that wins 70% of the time but loses 3× what it wins is a losing strategy. Always read win rate with the average win vs average loss (reward-to-risk). Expectancy — the next lesson’s topic — combines them.