The ideal entry into trading enables good stop-loss placement and considerable risk / reward potential. Easier said than done, right?
Well, maybe not. While these "perfect" trade entries may not be common, it does not mean that they are "difficult" to identify. It only takes a few training sessions in combination with the screen time to learn how to find them.
There are essentially three processes that I can use to find the ideal trade entry. In short, here's what I do every time I look for a new trade entry. So I think and what I'm looking for:
The 3 keys to finding the "perfect" trade entry:
The easiest way to do this is to first look for really obvious price action signals in the timeframe of the daily chart. The daily chart time frame traded at the end of the day is my preferred way of trading. I am looking for really obvious signals and patterns that "stick out like a sore thumb" and once you get familiar with the setups I taught, these are not difficult to see.
Next, you want to look for confluent factors in trading that support the signal. So you are a kind of “reverse engineering” of trading, if you like. When you see the signal, look back in time at the graph to see if the signal bar matches other key levels or has developed within a trend after retreating or has some other kind of confluency with the graph.
In essence, you want to set up as many supporting factors as possible if you want to find the "perfect entry point". The last thing you want to do when you find a signal that is flowing together is to check if you can “refine” the entry to increase the risk: the reward potential of trading (this is a more advanced concept) that is While not "necessary", it can improve the risk: reward. I will go into this in more detail in my professional trading course.
Note: Although there is really no “perfect” trade entry, we can still try to look for trades that have the greatest “weight” or confluence.
A brief breakdown of the 3 key elements of "perfect" entry are:
- Find the signal, pattern and level for trading. This is somewhat obvious, but it is also a skill that needs to be developed and refined. This tutorial uses pin-bar entry signals and tailed-bar entry signals.
- Look for input filters and confluent factors. Things that support trading, such as a strong trend, important horizontal support and resistance levels, 50% swing retracement levels, other past signals (event areas), moving averages and more.
- Entry-level tweaks and tricks; B. the 50% tweak retracement entry of the signal bar itself or simply a nearby key level for a more optimal entry point, which enables better stop placement and a larger destination.
My typical daily routine to find this "perfect" trade entry:
After I wake up and have a healthy breakfast (and yes, sometimes I eat vegemite) and do my morning exercise, I will flip the charts and see what happened after the US session ended. Remember I'm focusing on completing New York diagrams. Since I live in Australia, it's waking up between the previous day's US close and the European Open, so I have a great time watching the Forex daily charts, stock indexes and key commodities and seeing what happened before They are really moving again in Europe. Or when I look at my local Australian markets since it is morning, it is the perfect time to get into a trade IF there is one.
My goal is to quickly search my favorite markets to trade and then look for obvious trading signals / patterns that give me a head start in the market. If I find one, I will filter this trade by finding reasons that support the trade or that make sense with the surrounding market structure. At this point I also see whether trading might not make sense. Just because I find a potential signal doesn't mean that I always act. If a signal has little to no support confluence, I probably won't act.
When I finally find a signal that meets my criteria and makes sense in the surrounding market structure (confluence), I find the best and most logical way to enter it with the aim of the best stop-loss placement and a high potential risk reward.
Let's go through some examples:
In the graph below, I saw a very obvious EURUSD pin-bar sell signal for the daily chart that looked like it had a lot of confluence that we'll discuss in the next graph. For now, note that the tail of this pin header KLAR protrudes from the nearby pars, indicating a sharp reversal and rejection of this price range and implying that the price may move down in the coming days. I didn't have to look for this signal for long or hard, it literally "jumped" from the card to me:
In the next table we check what supporting “evidence” this pin-bar signal has. In this case, there is definitely enough evidence to justify entering the market. As the graph below shows, the market has been on a downward trend for several months, and the signal had formed after a retreat to resistance and an important resistance zone. The signal itself was also well-formed and obvious. In my opinion this trade was a "go" and all we had to do was set it up, pull the trigger and watch a movie or play golf or whatever you want. To do this, stare at it Don't trade all day after it's live.
Let's next look at the enlarged view of the pin header above. We are now concentrating on the entry "Tweak" and are examining whether we can improve the risk-return potential of trading. Note that in this trade we could have entered close to the 50% point of the pin bar to achieve a significantly improved risk-reward ratio. Realistically speaking, an exact 50% entry on the pin would have been difficult since the price barely touched this level before it went down again. However, you could still enter a return of the pen somewhere below this 50% point and with a stroke above the pen. You would have a logical stop placement and a strong 3R to 4R profit potential for trading.
In the following example, we look at the daily SPI 200 chart (Australian Stock Index). When I looked at this card, I quickly noticed the pin header circled below. It clearly matched an overhead level in the timeframe of the daily chart. The tail on this pin header protruded clearly and showed a sharp price reversal.
The following diagram shows a weekly diagram view of the above daily diagram. I often check the weekly chart when I find a trade every day or 4 hours to see how this signal makes sense in the context of the longer term or whether it makes sense at all. In this case the pin bar on the daily newspaper has formed at a very strong key resistance level / event area on the weekly chart as we can see below. It also formed in line with the downward trend on the daily and weekly charts.
Finally, we see a zoomed daily chart of the pin bar signal that we trade with. Note that no retrace / tweak entry was possible here, but this trade still had a good 2R reward potential as the next support was a little bit down, as you can see below. Trades like these, which form at a key level / an important event area and have the trend behind them and make sense daily and weekly, often lead to fast and large movements …
In the next example, we look at some bearish tail signals that have formed on the daily crude oil chart. You will quickly find that a very strong downward trend has occurred and that these bars have formed just below an important resistance level after the price had broken recently and closed below that level. Although these signals may not "jump" off the chart as in the first two examples, given the dynamics behind the sell-off in this market, they would have been obvious setups for the trained price dealers.
If we zoom out a little further, you can clearly see the size of this overhead level and the existing trend. These strong parts of the supportive confluence made this trade a virtual “child's play”.
An enlarged view of the signal on the daily chart shows that even with a stop loss just above the first tail bar high (and beyond) there was still an enormous potential risk reward for this trade as it was Market is really out of control. These types of trends are best for taking positions and making big profits. Note that with only one position, you could easily make a 5R win here. Not a bad payday.
I hope the main thing you take from today's lesson is that the best trades are those that are built with several support factors. In all of the examples above, the trend was really obvious and the signals formed at a key level in the market. This stuff shouldn't be difficult once you have the knowledge and understanding of what you're looking for. However, there is an "art and science" that requires some training, time and gut feeling to get really good.
I want you to remember that you are looking for an "intersection" of a signal and a level or a signal and a trend or even just a level and a trend, as in the case of a blind entry. Basically, we're acting like a sniper here, waiting for the right evidence to match and giving ourselves the green light to push the trigger for trade. All of this becomes easier if you understand how to read the footprint of money on the chart, i.e. H. The price action. However, it requires passion and commitment. As I got older I realized that the diagrams had become more and more meaningful to me, even the randomness in them.
You really have to be there in the long run if you want to succeed because trading is the ultimate test of its own. The market will uncover all of your human mistakes and how long it will take you to make really consistent money trading, or whether Doing everything mainly depends on how quickly or whether you can accept and correct these errors. While this part of the trade is not easy, there are people who can help you; other traders who understand what you're trying and what you're going through.
Learn to trade The market is a collective community of more than 20,000 members, all on the same side and all with the same ultimate goal of trading success. My members follow the trade ideologies, processes and concepts discussed in this article, which I explain in my advanced course. For this reason, I created Learn to Trade The Market because it enables me to “look over my shoulder” via my daily newsletter for trade configurations, in which I implement the routine described above and combine it with the core teaching of my course.
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