Stocks

Choosing Entry Types

BrandonWendell
Brandon Wendell
Instructor, CMT

Some traders like intraday trading, but many traders and investors either do not have the time or do not want to watch the markets while they are actively trading.  Instead, they prefer “set it and forget it” types of entries into trades. This allows the trader to preset their orders (entry, stop, and target) before the entry price has been met.  It also means that the entry will occur when price just reaches the proximal line of supply or demand.

Traders need to choose strong supply and demand zones for entry based on the rules and core strategies like the ones taught in our courses at Online Trading Academy.  When the zones are very strong, price will not move into the zone deeply but should turn direction just as it reaches it.  This means that traders who set their orders at the proximal lines of the zones will get to enter their positions.

How to choose your zone entry point

Taking trades in that manner offers several benefits.  Among them are the fact that emotion is removed from the decision to enter or not, and that you are free to do other things while profiting from trading.  The drawbacks to this type of entry are that you have the maximum amount of risk in the trade and you also do not have any confirmation that prices are reversing at the level until after the entry.

Free Trading WorkshopWith intraday trading, many choose to watch price action as it is happening.  Instead of “set and forget,” they will wait until price enters into the supply or demand zones before entering manually into a trade.  This will let them enter at a better price and has three benefits:

  • The profit will be larger as the entry is lower in demand or higher in supply
  • The risk will be smaller as the entry is closer to the stop
  • The trade has some confirmation due to visual confirmation of the trend change

How to read a stock chart

When a supply or demand level is very strong, then price should not penetrate the supply or demand zones very deeply.  This is a factor to be considered when analyzing trades or even deciding whether to enter a trade.  Entering trades inside the zone can be better but you want to see the price barely move into the zone before entry.  The deeper it moves into the zone, the less likely the trade will be successful.

Unfortunately there is not a set measurement as to how far is too far for price to move into the zone.  Generally, when price penetrates the level more than 50% it is not a good sign and you may not see a reversal or price may even break the zone, but that is a guideline and not a rule.  The best thing to do is to get to know your securities that you trade and see what price movement usually leads to a reversal or continuation.  Stocks will have certain “personalities”.  These are traits that occur on a regular basis and becoming familiar with them can lead to greater success in your trading.

Learn more about the core strategy at one of Online Trading Academy’s courses.  Visit your local center today and see how you can improve your trading success.

Brandon Wendell – bwendell@tradingacademy.com

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.