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Can you have different entry techniques for getting long? Sure you can, provided you have an associated set of rules (beliefs) for each different entry technique. You must be able to say that you went long because of this, this, and this reason. By having exact rules on what made you enter the trade, you will be able over time to reexamine the underlying logic of these rules and determine if the methodology is profitable. Note that we do not care if our reasons are logical (although that would be nice), only that they are quantifiable and repeatable, can be consistently applied, and are profitable. |
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For example, you could have one set of rules to get long when the continuity of thought is very strong in a trending market. Another set of rules could be used when the trend is sideways (up-down), and yet another set of rules could apply when the continuity of thought of the dominant force has just been shattered! However, it is absolutely imperative that your rules be rooted on quantifiable actions of the market, and that they occur fairly frequently. |
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When you are starting out designing your entry rules, you must keep in mind what your exit rules will or might be. What do you believe is more important: your entry price or exit price? Most experienced traders will put more emphasis into developing rules to exit a trade. This is because when you are flat, and only looking at a market, your rational mind is not being unduly influenced by your emotional mind. Hopefully you are able to see the market as it is; however, as soon as you enter into the trade your emotional mind will begin to unduly influence your perceptions and logical abilities. When a soldier is in the heat of battle, his life will often depend on the cold, detached, unemotional abilities of his general. Your exit rules will be a major defense against your emotional feelings and ego. |
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The best way to develop your entry and exit rules is to define your overall trading strategy. Go back and reread the possible strategies on going long and ask yourself why you would want to adopt each of those strategies. Do this now before reading any more; there are no right or wrong answers. |
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Here are a few beliefs traders might have on why they want to buy at a price higher than it currently is: |
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1. By continuing higher, the market has demonstrated that it is willing to go higher. |
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2. By waiting till a higher price has been accomplished, the market is indicating that it will probably continue higher. |
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3. By waiting for the bulls to rally prices above a price level that the bears should have defended, the market is indicating that the bulls are in firm command. |
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