In this new article the focus is on how to choose your trade entry types. 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.
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
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. Various trading instruments 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. There you have it, how to choose your trade entry types.
Written by Brandon Wendell, Online Trading Academy Instructor
As a former stockbroker, brokerage trader, and hedge fund trader, Brandon brings various market views and insight to his trading classes such as the Forex trading course and lectures on advanced futures trading, options strategies and more. He has held NASD securities series 7 and 63 licenses. An Online Trading Academy graduate himself in 1998, Brandon has been trading equities, options, forex, and futures in his own account ever since. Brandon taught for Online Trading Academy in 1999 to 2001 before becoming a Realtor and commercial mortgage broker and also managing a venture capital firm. Returning to the Online Trading Academy family late in 2005, he now balances trading, teaching and a real estate career. Brandon is also the San Diego Chapter Chair of the Market Technicians Association and holds the Chartered Market Technician Designation. Brandon has appeared as a guest on CNBC, Bloomberg TV, and Fox Business Channel. He has conducted special seminars for CNBC staff on technical analysis of the financial markets. Brandon has published articles in The Trader’s Journal, Forex Journal, Investor Magazine, and Investor’s Business Daily. Brandon has also appeared as an industry expert speaker at the Trader’s Expo, The Money Show, and Asia Traders and Investors Conference.