Entry Strategies and Methods

[Charlton]

I've watched as you two have gone 'round and 'round about what is more important...the entry or the management of the trade. Guys...the simple answer to which one of these is most important is, "YES"!
:

Maximus - I couldn't agree more. I have made several posts on stops, which is just one aspect of money management. However money management will do little good if you have not identified the correct set-in in the first place as you have emphasised in the next paragraph

My suggestion is to look for trades that have a bare minimum of a 1:2 (or even a 1:3) risk vs. reward ratio. Accepting anything less DEMANDS the talent and ability to manage the trade effectively.
:

useful advice - calculation of risk reward ratios are essential

Finally I should say that I never intended this thread to be a debate between entries, exits and money management. I never said that the latter were unimportant or less important. I said that I thought it was harder. This is because once you are in a trade you have FOCUS. You have a set of rules to follow (or should have). Many readers have misinterpreted my original message and have taken it in a direction I had not planned.

It was not until TheBramble responded that the thread was returned to its original purpose.

SO I WILL MAKE IT CLEAR NOW - I BELIEVE THAT ENTRY STRATEGIES, EXIT STRATEGIES, RISK AND MONEY MANAGMENT ARE ALL EQUALLY IMPORTANT.

I was merely trying to elicit views on the ways traders FOCUS in on potentially good trades starting with the population of thousands of shares or other instruments available.

Thanks Maximus for your contribution

Charlton

 

[garethb]

There are hundreds of different ways of finding potential trades - but you could try this for swing trades with holding period of a few days, or longer if you want to go for the big breakouts

Price tends to move in a flow from high volatility/ wide range bars, through to low vol/narrow range bars.

Stocks in uptrends tend to go Breakout/bar expansion - Pullback/Consolidation/vol constriction - Bar expansion/breakout.

Build a simple scan on EOD data to find strong stocks - many potential indicators or price characteristics. Filter out those with insufficient volume or price too low (esp. in US markets) Maybe get a list of about 200.

Use Mk1 Human Eyeball to identify stocks which are pulling back in uptrend, look for constriction in volatility/bar range at support levels to identify good long candidates. Look for good consolidation patterns and volume preferably falling as pattern develops to spot best opportunities. Do all this before market open.

Find entry points based on lower timeframe intraday.

Entry points and stops based on narrow range bars relative to target based on bar expansion offers good risk/reward. If you can get a good hit rate of stocks breaking out from a consolidation pattern then I find the main trade management/ exit decision is whether you sell quickly as you approach resistance eg previous high or hold for anticipated breakout to new highs. I think this depends on your view of the overall market condition - is it trending up nicely rewarding medium term holds or is it choppy and unpredictable?

Similar strategy in reverse for shorts should work but personally I find them harder to time - you may find them easier

Hope this give useful food for thought

Regards,

Gareth