Entry Strategies
Entries are the last piece (and the one with least weight) of the puzzle. There should be a well built plan in advance that includes, overall market direction, based on multi time frame analysis and appropriate levels where potential entries could be executed.
If I had to break down all the steps (or modules/parts) of my trading routine, into percentages it would probably look like this:
- Elliot Waves: 25%
- Market Structures: 25%
- Levels: 30%
- Divergences/Convergence Momentum: 15%
- Entries: 5%
Take these numbers with a grain of salt. They are for illustrative purposes only. The bottom line here is that if you got the direction right, it won’t matter much how exactly you are going to enter.
Setting your stop loss at a distance to protect yourself from spikes is probably more important at that stage.
Another important factor here is that the path to success is much shorter if you have gotten the first 4 points right (EW, MS, Levels, Div/Conv & Momentum). The psychological burden is much less, simply because you see the price moving in your direction even though you were kick out because your stop loss was too tight. This is a small and easy adjustment to implement in reality.
On the other hand if you go long and the market goes in the completely opposite direction, you need more than stop loss adjustment. No entry method, strategy or technique will turn the odds in your favor.
The context around your entry setup is much more important than the actual entry.
The type of entries that i’m using are:
- Pending Orders (Aggressive Approach).
Drop a pending order at specific level without any further confirmation (breakout/reversal) - Entries from software/manual strategies.
(FX Delta for example, even though FX delta is also performing the market analysis part to a higher degree). In this case, you rely on a signal from the strategy which is in agreement with your general market analysis. - Breakouts.
– Trend Line Breakouts.
– Horizontal (ranges) Breakouts.
– Triangles/Wedges/Flags Breakouts.
Almost the same logic is applied to all structures/formations (TL/triangles etc) with some small differences explained below. Keep in mind that ALL formations are derivatives of trend lines. It all starts with a single trend line. So when you are looking at a flat, if you remove one of the lines, you will get a single trend line. I believe in simplicity, so whenever possible try to simplify and breakout down your analysis to the smallest possible fraction.
3.1 Trend Line Breakouts.
– Conservative breakouts are applied in situations where the overall market analysis shows contradicting signs. Breakout of the TL, price positions itself away from the TL, pullback/retest, break of the newly formed high low = entry. Protection is placed either at the most recent swing high/low or at the larger time frame swing (where the previous trend ends).
– This type of trend line breakout is used less often and it is applied in situations where we have “ideal” overall market analysis with a very high degree of certainty. In other words pretty much everything fits and points in the same direction. In such market conditions it is best to attack a bit more aggressively, as usually the price is moving fast, without providing any significant pullbacks.
3.2 Horizontal (Ranges) breakouts.
The only significant difference that I apply here is the state of MACD. I still look for the price to close beyond the breakout level, remain there for a few candles (holding the breakout) but on top of that I will also check whether MACD MA’s are converging with the price or diverging.
3.3 Triangle Breakout.
Same rules as Trend Line Breakouts
3.4 Wedge Breakout. Same rules as Trend Line Breakouts
3.5 Flag Breakout. Same rules as Trend Line Breakouts
3.n N breakout, same as Trend line breakout.
4.Reversal Pattern (Conservative Approach).
Divergence followed by convergence. When used as an entry method, this is usually happening inside the corrective leg (at the end of the correction). This is actually what FX Delta software does. Detect the move on the higher TF (the direction), wait for a pullback and look for div + convergence (reversal) to attack. Steps:
1. Divergence
2. Convergence (the breakout moment)
3. Pullback
4. Buy
Aggressive or Conservative?
Another important question arises once we figure out the technical part of executing these setups: Aggressive or Conservative?
Once again, it all circles back to the general market analysis. During the years I figured that, the best way to decide which way to go is by using the “checklist”. I spoke about this method multiple times in my videos but here is a quick recap.
CHECKLIST IDEA
As a discretionary trader, I’m looking at multiple factors and methods in order to gather as much diversified information on the given market as possible. What does that mean in reality?
I’m using Elliott Waves, fibonacci extensions, fibonacci retracements, markets structures (ranges/triangles etc), i’m using divergences, i’m occasionally going to check out the COT data (when going for longer term trading/investment), i’m going to check the strongest levels, i’m going to see how the price action is developing (for example: is it consolidating after a breakout or immediately rejects the level), i’m going to check for false convergence patterns, matryoshka patterns, Delta Pattern, and pretty much any useful technique that I have learned or developed during the years.
