Much has been written about when to buy stocks, forex, or other instruments. In fact, it is the topic that is written the most about in trading. As if there's nothing else to trading than timing your entries. On the contrary, I have come to realize that timing for entries is actually the least important aspect of a trade (see a real world prove below). Nevertheless, it is still a factor for consideration in a complete trading strategy. As such, this post is about the 4 fundamental entry signs that I use to enter in any trade. No matter which trading setup I am using, I only place my order because one or more of these conditions are met. To make sure that everyone is on the same page. Let me define what exactly I am talking about here. I define the act of timing for an entry as the process for deciding where or when to place an order after a signal has been flagged by a trading setup. In particular, it would be step #8 according to my FTC setup. For example, if the conditions to buy USDCAD are met on the daily chart, then I will zoom in on to the 3-hour timeframe to spot a confirmation of the move. Once that is also satisfied, I zoom in even more to the 30-minute chart to spot when (if market order) or where (if limit order) to place the order. Figuring out exactly when and where to place your bet is a topic for much discussion, even when you know that you want to buy it somewhere around this level. The better the price, the better your reward/risk will be. Wait too long, and the market could leave you behind. Long story short, when it comes down to it, there are simply 4 fundamental entry signs for buying in any market that I use. I only buy at/when the price is:
- at a support area
- at a Fibonacci retracement level
- at oversold conditions
- showing accumulation by large players
(and vice versa for shorting a market) These are necessary, but not sufficient entry conditions. One or more of these conditions must be met for all trades. But satisfying these conditions would not guarantee profitability. I know I've repeated this many times now, but I can't stress this enough. This is just one small step of a thorough analytical process in deciding your trade. Don't go around buying everything on support levels or when RSI goes over 80. The reason why I find it necessary to write about something so trivial now is that I have just been caught trying to catch a top again. Take a look at the figure below illustrating my trade orders trying to catch a USD/CAD short-term top. My trading setup flagged for a short USDCAD trade. So I gave it a few tries. Eight times. Eight! If only I had remembered my 4 fundamental entry signs, I wouldn't have tried to short this pair all over the place and getting stopped out again and again. If I adhered to these 4 signs, I would have only tried it a couple of times at 1.0480 resistance and then let it pass once the condition is violated. On the other hand, as I was saying earlier that the entry is the least important aspect of a trade. I came out of this mess as illustrated unscathed. I managed to exit all of my entries at break-even, or at least close to it. So even failing 8 entries, my account balance barely budged. Recall I said timing for entries is the least important part of trading? Well, this is a good example of it. You could mess up your entries, 8 times, and still come out ok. You probably know this already, but I'll say this for the sake of thoroughness. By far the most important aspect of a profitable trading strategy is prudent risk management. That is what saved me in this embarrassing shorting USD/CAD example.
[caption id="" align="aligncenter" width="580" caption="USDCAD, 15 minute, with order history"]USDCAD, 15 minute, with order history[/caption]