Entries
Most new traders are caught up with solely this aspect of trading, but you would soon realize that it's simply a part of the trading equation.
There are a few ways to enter a trade and here i share with you what are their pros and cons of each of them.
1) Candlestick patterns - Alot of traders would be familiar with this due to their popularity. The main candlestick patterns being the "Pinbar" and "Engulfing".
Pros:
They're easy to spot and give you a predefined stoploss which is usually at the tail end of the candles
They have a logical meaning behind them as it shows rejection of prices
Gives good risk reward as the stoploss is usually tight
Cons:
Often price may not give you such signals and still trade in your intended direction, thus missing out the move
The location of the Stoploss may not be logical. E.g. you may be cutting into the support area which you should be intending to long
Possibility of a huge candlestick pattern (due to news release) which leads to a large stoploss
2) Breakouts - Turtle traders traded the 55 day breakout with many hedge funds using similar entry approach
Pros:
They never miss a move in the market because you're always participating in every breakout
Mechanical in their entries with no subjectivity
Cons:
A lot of whipsaws as they have to cut many times before hitting a home run
Psychologically harder to implement
3) Retracements - The buying "value" approach. Usually trading from Support Resistance or MAs.
Pros:
Good chance of having your positions in the wicks of the candles
Easy to know when you're wrong as stoploss is usually a fixed ATR away from your zone
Cons:
Always against short term momentum
May miss out a move if price doesn't come to your zones and eventually trade into your intended direction
These are some of the ways you can enter the markets and as you can see there's nothing "magical" about these entries.
The Magic only begins when you get the entire equation right and not just part of it.
Moving on i will discuss about exits and some of the approach you can consider.
Most new traders are caught up with solely this aspect of trading, but you would soon realize that it's simply a part of the trading equation.
There are a few ways to enter a trade and here i share with you what are their pros and cons of each of them.
1) Candlestick patterns - Alot of traders would be familiar with this due to their popularity. The main candlestick patterns being the "Pinbar" and "Engulfing".
Pros:
They're easy to spot and give you a predefined stoploss which is usually at the tail end of the candles
They have a logical meaning behind them as it shows rejection of prices
Gives good risk reward as the stoploss is usually tight
Cons:
Often price may not give you such signals and still trade in your intended direction, thus missing out the move
The location of the Stoploss may not be logical. E.g. you may be cutting into the support area which you should be intending to long
Possibility of a huge candlestick pattern (due to news release) which leads to a large stoploss
2) Breakouts - Turtle traders traded the 55 day breakout with many hedge funds using similar entry approach
Pros:
They never miss a move in the market because you're always participating in every breakout
Mechanical in their entries with no subjectivity
Cons:
A lot of whipsaws as they have to cut many times before hitting a home run
Psychologically harder to implement
3) Retracements - The buying "value" approach. Usually trading from Support Resistance or MAs.
Pros:
Good chance of having your positions in the wicks of the candles
Easy to know when you're wrong as stoploss is usually a fixed ATR away from your zone
Cons:
Always against short term momentum
May miss out a move if price doesn't come to your zones and eventually trade into your intended direction
These are some of the ways you can enter the markets and as you can see there's nothing "magical" about these entries.
The Magic only begins when you get the entire equation right and not just part of it.
Moving on i will discuss about exits and some of the approach you can consider.
Whether you can or you can't, you are both right.